RESET Business and Society in the New Social Landscape
JAMES RUBIN and BARIE CARMICHAEL
INTRODUCTION
most pressing issues. Millennials and Generation Z’s, those born after 1996, may be the most publicly engaged generations in history. The Intel Pentium and Brent Spar crises, in retrospect, were early indicators of how web-enabled communities can affect business, hard to foresee at the time but now commonplace.
DECLINING TRUST AND RISING EXPECTATIONS These rapid changes in technology and media have taken place against a backdrop of a steady decline of trust in business. Operating an organization in a low-trust environment is costly, requiring corporations to spend time and money to overcome initial skepticism about implementing new strategies or corporate branding campaigns or launching new products. When a company is distrusted, 57 percent of people surveyed believed negative information after hearing it once or twice, whereas 15 percent believed positive information. If a company is trusted, 51 percent believed positive information versus 25 percent believed negative information.4 Just as important, this decline of trust in business has coincided with a rise in the public’s expectations that business should be responsible for many social issues now facing society, from obesity and food safety to global warming and pollution. Recognizing that businesses today must navigate a new social landscape, this book draws on research developed in a collaboration between the University of Virginia’s Darden Graduate Business School and APCO Worldwide called Champion Brand that has tracked the views of over Q
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thirty-six thousand respondents on the relationships between business and society in fourteen of the world’s largest economies. The 2014 results found that respondents exercise unprecedented scrutiny of and have expectations for corporations themselves and their behavior, not just their products. Among the research findings, 77 percent agreed that global corporations have a bigger impact on people’s lives today than they did ten years ago, 60 percent agreed that companies now serve some functions in society that were previously reserved only for government, and 68 percent agreed that it is as important to know how a company operates as it is to know what it sells.5 The widening distance between declining trust and rising expectations creates a gap that corporations need to bridge in ever more inventive ways. In this new context, businesses can be swept up in fast-moving narratives, cast as the problem or solution, depending on their business strategies, policies, and actions. Or, they can find themselves a target in the political crossfire of the web’s polarized communities. If management decides the gap between low trust and high expectations is not its business or ignores the potential business impact of the web’s volatility, it risks the organization’s ability to withstand the scrutiny of the new social landscape, at a time when global transparency is on the verge of a new inflection point, if not already a decided matter. Business, like politics, is no longer parlor sports taking place among gentlemen of influence and propriety behind the proverbial closed doors. Businesses, both their crises and brand-enhancing narratives, are now the staple of 24/7 cable news and social media. Baby boomers who are the first generation apt to rely more Q
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INTRODUCTION
on their IRA or 401K stock portfolios in retirement than on their pensions (if they are among the minority who have them) or social security have a clear stake in how business more broadly operates. How corporate management responds to the public’s growing mandate may determine its very relevancy in this new social landscape.
A NEW CORPORATE PLAYBOOK The digital revolution presents a pressing challenge for corporations, enabling them to positively engage in new ways but also providing global platforms for a web-empowered public to reveal and amplify their businesses’ negative stakeholder impacts. The 2008 financial crisis cast risk in a new light as trust sank to new lows, and its legacy continues nearly a decade later for financial services companies. A particularly relevant cautionary tale is the role played by this new social landscape in BP’s Deepwater Horizon crisis in 2010. Long before the spill, BP had followed the then well-established corporate playbook for advancing reputation and managing risk. On the upside, BP had invested in building its corporate brand, differentiating itself by claiming to be “beyond petroleum,” positioned for the future by investing in alternative energy. To mitigate downside risk as a global energy company, BP also had the traditional crisis preparations in place: a dedicated crisis unit, practice drills, and recurring exercises involving hundreds of people to prepare for potential scenarios. What BP did not have in place was a YouTube Q
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channel, Facebook page, Flickr account, blog, or sufficient experience with Twitter.6 Yet by 2010, Facebook already had 608 million registered users, and Twitter had 26 million, growing to 150 million by 2011. The Deepwater Horizon disaster began on April 20, 2010. Clearly, the damage caused by a wellhead leaking fiftythree thousand barrels of oil per day is an unprecedented disaster. In that context, as BP has acknowledged, the only thing people want to hear is how the problem is being fixed. However, in the context of the new social landscape, BP accelerated their reputational damage by not taking part in social media conversations until launching their social media platforms on May 1, nearly two weeks after the rig exploded. In the warp speed of social media, that was a millennium. By mid-May, 2010, a fake BP Twitter account satirizing BP’s corporate statements had twice the number of followers as the real BP account.7 Even in 2016, as this book was being written, a June 2010 YouTube parody of the Deepwater Horizon disaster simulated by spilling coffee during a corporate meeting had over 13 million views and counting. The professionally produced skit features Kate McKinnon of Saturday Night Live and a cameo from Kevin Costner.8 Clearly, we are not in Kansas anymore. Building a sustainable business in this new landscape requires more than memorable brand taglines and crisis preparation drills. Instead, the new landscape is fundamentally resetting the relationship between business and society, requiring strategic management solutions anchored in a critical outside-in understanding of the stakeholder footprint of the business model itself. Recent advances in corporate Q
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