Winning the Reputation Game: Creating Stakeholder Value and Competitive Advantage

274 Pages·2016·2.76 MB·English

by  Grahame R. Dowling

Winning the Reputation Game

Winning the Reputation Game
Grahame R. Dowling
The MIT Press
Cambridge, Massachusetts
London, England
© 2016 Massachusetts Institute of Technology
All rights reserved. No part of this book may be reproduced in any form by any electronic
or mechanical means (including photocopying, recording, or information storage and
retrieval) without permission in writing from the publisher.
This book was set in Sabon by Toppan Best-set Premedia Limited. Printed and bound in
the United States of America.
Library of Congress Cataloging-in-Publication Data
Names: Dowling, Grahame R. (Grahame Robert) author.
Title: Winning the reputation game : creating stakeholder value and competitive
advantage / Dowling, Grahame R.
Description: Cambridge, MA : The MIT Press, 2016. | Includes bibliographical references
and index.
Identifiers: LCCN 2015039867 | ISBN 9780262034463 (hardcover : alk. paper)
Subjects: LCSH: Corporate image. | Social responsibility of business. | Organizational
effectiveness.
Classification: LCC HD59.2 .D696 2016 | DDC 659.2—dc23 LC record available at
http://lccn.loc.gov/2015039867
10 9 8 7 6 5 4 3 2 1
Contents
Preface vii
1 The Value of a Winning Corporate Reputation 1
2 Corporate Reputation as a Strategic Game 15
3 How Corporate Reputations Are Formed and Work 31
4 Strategy-Led Corporate Reputations 49
5 Simply Better 67
6 Corporate Storytelling 91
7 Managing Corporate Reputations: Top Down 117
8 Measuring Corporate Reputations: Keeping Score 139
9 Keeping Out of Trouble 161
10 Distracting Reputation Myths 187
11 Frequently Asked Questions 207
Epilogue 227
Appendix 249
Index 253

Preface
One thing that makes the study of corporate reputations interesting is
why some companies become admired and respected for their achieve-
ments while others in their industry go largely unheralded. Across the
world there are now more than 100 annual opinion polls that document
these effects.1 Why does a company like Apple have a better reputation
than S amsung ? It has been voted as the World’s Most Admired Company
in the annual Fortune survey every year from 2008 to 2015. Why does
Harvard University have a better reputation than its cross-town rivals
Boston College, Lesley University, MIT, Northeastern University, Suffolk
University, Tufts University, and the University of Massachusetts ?
Academics, consultants, and commentators in the business media each
have their own favorite theory. Here I will outline mine.
The theory described in this book seeks to explain companies with
three broad types of reputation. One group has weak reputations. They
really don’t register on the radar of the people who buy their brands or
most members of the general public. Then there are organizations that
have strong reputations. Some have a generally good reputation such as
the R ed Cross or a generally poor reputation such as Rupert Murdoch’s
News Corp. Finally, there are companies with a mixed reputation, either
across different groups of people or where the same people consider
the company has some good and some bad aspects. These are an interest-
ing group of companies. They appeal to some people and are repulsed by
others. And they don’t fit easily into any of the current theories of corpo-
rate reputation.
My theory is grounded primarily in the field of strategic marketing.
The strategy part focuses on how companies use their capabilities to
create superior products and services. The marketing part focuses on how
viii Preface
they attain and retain their target customers. Success at these endeavors is
at the heart of why a company like Apple and a university like Harvard
have strong reputations that have helped them achieve leadership in
their industries. They offer superior value to their employees and target
customers than most of their competitors. From this success comes the
authority to tell an engaging story about the character and market leader-
ship of the organization. These stories contextualize the reputations of
each organization for employees, customers, business partners, media,
and investors.
To describe how companies with strong reputations attain their status,
I use the metaphor of a game, defined in my Webster’s dictionary as “a
procedure or strategy for gaining an end.” The strategy is to build and
maintain a strong corporate reputation, and the end is to gain a sustain-
able competitive advantage. Hence the title of this book—W inning the
Reputation Game . The goals, rules, language, and scoring of this game
are described in chapter 2. Scholars should note that this book does not
follow the precepts of game theory or economics that discuss reputation.
While the reputation games formalized in these disciplines provide
insights for some of the ideas discussed here, they are too limited to
describe the behavior of organizations with complex reputations like
Apple and Harvard University .
Throughout the book I use a number of case examples to illustrate the
points being made. Their role is to complement the more scientific studies
referred to and to highlight the peculiarity, complexity, and differences
between organizations. For example, some of these companies have good
reputations that stand up to repeated attacks by their critics. Others like
tobacco and alcohol companies, called “sin” stocks, have bad reputations
but make handsome financial returns.2 And some companies are admired
and respected far beyond what their fundamentals would suggest. As Bill
Starbuck explains, when scientists use statistical techniques to uncover
relationships between large numbers of companies they often lose sight of
the commonsense content of the data.3 To help avoid this, he suggests that
the observations (companies) studied should also include the exceptional
and the mundane as these require explanation about the unique ways in
which companies exploit their environments.
Over the last twenty years my professional interest in corporate repu-
tations has focused on answering two questions. What does a company
Preface ix
need to do in order to be admired and respected? What are the payoffs
from having such a good reputation? An economist might paraphrase
these questions as—is there a market for reputation? And a strategist
might ask: How does a good reputation provide a competitive advantage
to a company?
While a considerable amount of research has focused on these ques-
tions, a recent summary of this scholarship in T he Oxford Handbook of
Corporate Reputations revealed that there is little consensus about the
answers to them.4 There are many competing theories about how corpo-
rate reputations are formed and how they work to provide one company
with an advantage over its rivals. While some of these theories have
received support from piecemeal research findings about the effects
of good and bad corporate reputations on the company’s stakeholders,
others are speculative in nature. Notwithstanding this patchy support, at
face value most of these theories seem sensible. They are based on the
simple proposition that companies that behave well will be admired and
respected for this behavior. And this will help them attract the custom
they need to survive and prosper.
However, what is disconcerting about this field of scholarship is that
there are some high-profile companies that seem to ignore the advice of
scholars and consultants about how to create a reputation of distinction.
And there are some other companies that deliberately do the opposite to
what is suggested. For example, many scholars and business commenta-
tors suggest that companies will be admired and respected more if they
become more transparent about their operations and their dealings with
outsiders. The logic behind this proposition is that transparency allows
outsiders to make better judgments about the company’s prospects.5 But
transparency is abhorrent to many companies. The last thing they want is
members of the general public, or nosy journalists, or competitors scruti-
nizing their operations. The most likely outcome here is a public relations
nightmare.
Corporate practice that does not reflect scholarly advice can be the
result of three factors. One is that the companies that don’t conform are
anomalies. For some specific reason it is not in their best interest to follow
the lead of their peers. A second reason is that these companies are not
aware of, or are unable to follow, the advice proffered. The final explana-
tion is that the academic advice is outdated or simply wrong. In this case