02 charles fombrun-reputation-institute_(eua)

COMPETING IN THE REPUTATION ECONOMY

1 © 2013 Reputation Institute, all rights reserved.

Dr. Charles J. Fombrun Chairman

2nd Latin American Conference on Reputation 28 October 2013, Medellin, Colombia

© 2013 Reputation Institute, all rights reserved. 2

“Every individual... intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

- Adam Smith (1776)

1. The New Economics

2. Who is Succeeding and Why 3. The Reputation Journey 4. Beyond Companies 5. New Rules



Adam Smith’s Economics

•  Atomistic buyers/sellers

•  Perfect Information

•  Moral Behavior

•  Tangible Assets

•  Investment Capital

•  Coordinated by the Invisible Hand of the Market

The New Economics

•  Powerful actors

•  Asymmetric Information

•  Opportunistic Behavior

•  Intangible Assets

•  Support Capital

•  Coordinated by the Visible Hands of Stakeholders



Concentration of Power with Corporations

The Rise of Enabling Technologies Concentration of

Power with Stakeholders

7

In this brave new world, what you say

doesn’t matter…

It’s a question of whether you are trusted

& believed…

© 2013 Reputation Institute, all rights reserved.


17%

32%

68%

80% 81%

83% 68% 32% 20% 19%

0%

20%

40%

60%

80%

100%

1975 1985 1995 2005 2009

Shifting Composition of S&P 500 Market Value

Intangible Assets Tangible Assets

Source: Ocean Tomo


Source: Brand Finance GIFT 2013

USA $11,916 68% Switzerland $978 61% Australia $875 58% United Kingdom $2,050 58% France $1,273 54% Canada $1,012 53% Germany $1,032 52% Netherlands $466 49% India $626 48% Brazil $648 44% Hong Kong $520 42% China $1,169 35% Italy $280 28% South Korea $221 16% Japan $266 6% Total Global $28,305 50%

Value of Intangibles (Billions of USD)

% of Enterprise Value


Source: Bloomberg (as at 17/9/2013), in billions of USD


…a new marketplace in which people buy products, take jobs, and make

investments based primarily on their trust, admiration and appreciation

for the companies and institutions that stand behind them.


Reputation is an emotional bond…

…that ensures

License to Operate

Product Preference

Top Talent Acquisition Access Advocacy

Adj-R2 = 0.827 RepTrak™ Pulse Score

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

30.00 40.00 50.00 60.00 70.00 80.00

% R

espo

nden

ts w

ho W

ould

Rec

omm

end


Transport & Logis.cs 58 62.9 Financial -‐ Insurance 105 51.0 Airlines & Aerospace 50 47.7 Services 112 47.4 Financial -‐ Diversified 45 41.3 Energy 73 37.5 Consumer Products 39 26.6 Telecommunica.ons 68 26.1 Chemicals 17 22.8 Tobacco 4 18.5 Automo.ve 25 17.0 Food -‐ Manufacturing 63 15.4 Construc.on & Engineering 56 13.1 Computer 19 10.6 U.li.es 63 10.0 Raw Materials 52 8.8 Industrial Products 42 6.6 Electrical & Electronics 15 3.5 Informa.on & Media 56 2.4 Conglomerate 19 -‐15.1 Pharmaceu.cals 33 -‐15.9 Retail -‐ Food 56 -‐17.7 Beverage 26 -‐18.4 Retail -‐ General 148 -‐46.1 Financial -‐ Bank 118 -‐243.3 Total 1362 112.6

United Kingdom 379 228.3 USA 261 151.3 Germany 52 84.1 Italy 69 74.9 Australia 58 60.7 France 36 59.4 Norway 41 43.6 Mexico 36 39.9 Brazil 118 12.7 Sweden 33 -‐5.1 South Africa 19 -‐15.8 Switzerland 37 -‐45.6 Ireland 50 -‐46.3 Denmark 36 -‐53.4 Canada 53 -‐105.9 Portugal 32 -‐144.4 Spain 52 -‐225.9 Total 1362 112.6

Countries

Industries


Company Country RepTrak® Pulse 2013

Change in RepTrak® Pulse (2007-‐2013)

Cobham United Kingdom 80.6 12.3 Deutsche Post Germany 71.7 9.2 Indesit Italy 78.5 8.3 Volkswagen Germany 83.9 7.5 Siemens Germany 79.1 7.5 Unilever United Kingdom 71.2 0.7 Virgin Group United Kingdom 74.7 1.0 Illy Cafe Italy 79.4 0.3 FedEx USA 76.4 0.2 Boeing USA 69.9 0.1 Berkshire Hathaway USA 70.1 0.0 Mayo Clinic USA 80.8 0.0 Lloyd's of London United Kingdom 66.2 0.1 Statoil Norway 73.5 -‐0.6 Ryanair Ireland 39.0 -‐4.1 BP United Kingdom 52.4 -‐4.1 Vestas Denmark 65.0 -‐10.8 HMV United Kingdom 56.2 -‐10.9 H&M Sweden 56.4 -‐11.8 La Caixa Spain 42.4 -‐15.8 Danske Bank Denmark 35.8 -‐17.8



19

“Stakeholder interests, risks, and opportunities are deeply integrated in every business decision that we take. Every single project or investment decision comes with reflections, risk maps, and mitigation actions around the particular topic that we’re discussing.”

- Helge Lund, CEO

20

“We missed the issue of obesity and the value of healthy and nutritional

food. We were behind, while Nestlé was riding that wave. Not being in tune with society, with the benefit of hindsight,

can cost you dearly.”

- Paul Polman, CEO

21

22

23

Business Ra*onale

Intelligence & Strategy

Management & Accountability Integra*on

© 2013 Reputation Institute, all rights reserved.

24

Business Rationale

Intelligence & Strategy

Management &

Accountability

Activation

50% Say that they Definitely know the business rationale for reputation management, which stakeholders influence the business, what specific business outcome they want from each, and how their company vision is relevant to them.

32% Say that they Definitely have ongoing perception tracking with key stakeholders and they understand what stakeholders expect from them and have translated that into a strong corporate narrative that is used to tell the enterprise story and be relevant to key stakeholders 26% Say that they Definitely are making the reputation strategy come to life for teams and functions through tools and training so that each one can use the intelligence to develop their stakeholder action plans.

38% Say that they Definitely are activating their corporate narrative across all these touch points and they are enabling stakeholders to participate in the story telling.

Source: Reputation Institute, Reputation Leaders Study, 2013


FULL INTEGRATION INTO LONG-TERM STRATEGY & INVESTMENTS

26

# 1 We don’t have a structured process for implementing reputation management into our business planning (57%)

# 2 We are not leveraging the knowledge we have to be relevant to each stakeholder (45%)

# 3 Internal silos prevent cross-functional collaboration (34%)

27

Comparison with financial metrics(Telefonica)● Reputation and

other Customer Metrics comparedwith a range of Financial Indicators

● Reputation of Telefonica + Primary Competitor was found to be responsible for 17% of ARPU, 29% of churn and 11% of Financial Metrics Average globally

5%

4%

28

29

30

“…everything we do affects our reputa*on, and our reputa*on affects everything we do – this is why we need to manage and protect it.”

-‐ Dennis Jönsson, President and CEO, Tetra Pak Group


32

More tourists

Attract FDI Attract knowledge & talent

Increase exports

Improved public diplomacy

33

What can you do to mitigate the risk?

Visit

Invest

Live

Work

Buy From

34

Rank Country Country RepTrak®

Pulse 2013 1 Brazil 57.81 2 Peru 54.86 3 Puerto Rico 47.41 4 Chile 51.01 5 Argen*na 50.17 6 Mexico 47.02 7 Hai* 45.84 8 Venezuela 45.50 9 Bolivia 43.73 10 Colombia 37.75

Rank City City RepTrak® Pulse

2013 1 Montevideo 61.77 2 Cancun 59.40 3 San*ago 58.65 4 Rio de Janeiro 57.55 5 Buenos Aires 57.52 6 Lima 56.63 7 San Juan 56.36 8 Sao Paulo 55.77 9 Santo Domingo 54.05 10 Port-‐au-‐Prince 53.3 11 Bogota 50.20 12 Caracas 48.97 13 Mexico City 47.17

Latin American Countries Latin American Cities

n= 639

Germany

Russia

FranceJapan

UK

Italy

Canada

Colombia Global (G8)

Score

US

37,75

44,73

33,7937,62

44,45

32,18 41,69

29,14

38,41

35

Above 80 Excellent/Top tier70-79 Strong/Robust60-69 Average/Moderate40-59 Weak/VulnerableBelow 40 Poor/Low est tier

n= 203

Germany

Russia

FranceJapan

UK

Italy

Canada

Bogota Global (G8) Score

US

50,20

53,38

53,4750,64

53,25

45,52 48,49

51,84

45,03

36

All G8 City RepTrak® scores are directional due to low counts.

Above 80 Excellent/Top tier70-79 Strong/Robust60-69 Average/Moderate40-59 Weak/VulnerableBelow 40 Poor/Low est tier

37

Country Reputations City Reputations

38

Attr

ibut

e Im

porta

nce

Glo

bal (

G8)

Global (G8)Attribute Score

n = 639

Physical BeautyEnjoyable

Lifestyle

Friendly & Welcoming

Business Environment

Effective Government Policies

Contribution to Global Community

Safe Environment

Operational Efficiency

Quality Products & Services

Brands and Innovation

Culture

Technology

Workforce

Education

3,5

4,5

5,5

6,5

7,5

8,5

29,0 31,0 33,0 35,0 37,0 39,0 41,0 43,0 45,0 47,0 49,0 51,0 53,0 55,0 57,0 59,0 61,0 63,0 65,0

LESS IMPORTANTATTRIBUTES

IMPROVEPERCEPTION

MAINTAIN PERCEPTION

OPPORTUNITYATTRIBUTES

High importance and strong ratings for

Colombia

Strong ratings of Colombia but of less

importance

Less importance and lower ratings for Colombia

High importance and Lower Ratings for Colombia

39

Visit 43,97 29,95 60,18 82,79

Invest 32,20 17,19 48,26 75,16

Live 30,79 15,86 47,17 75,19

Work 30,10 15,32 47,65 74,32

Buy 39,83 24,85 55,18 81,31

. Study 32,03 16,42 49,50 76,93 .

Reputation Score < 50.0

Reputation Score 50.0 -

70.0

Reputation Score 70.0 +Overall Score



Products

Market Push

Authority

Clarity

Monologue

Messages

Expressive Pull






Gracias!

Argentina-Australia-Belgium-Brazil-Canada-Chile-China-Colombia-Denmark-Finland-France-Germany-Greece-India Ireland-Italy-Japan-Mexico-Netherlands-Norway-Panama-Peru-Portugal-Puerto Rico-Russia-South Africa-Spain-Sweden

Switzerland-Turkey-Ukraine-United Arab Emirates-United Kingdom-United States

Marketing

02 charles fombrun-reputation-institute_(eua)