Venture Capitalists Face the Reputation Economy

Last week the New York Timesexplored the recent public relations and marketing boom among venture capital firms. In the past top firms have “operated under levels of secrecy typically reserved for Swiss banks,” Nicole Perlroth writes, but with fewer active firms, meager investor returns and increased accessibility the tables have turned in the world of venture capitalism. “Ten years ago, entrepreneurs needed some kind of insider advantage to get a meeting with a firm,” Perlroth explains. “Now the most promising entrepreneurs do careful due diligence — on Twitter, in blogs and in the media — before agreeing to take coffee with a V.C. The best entrepreneurs are courted by the venture capitalists, not the other way around.”

[Read more...]

Building a Reputation- Volkswagen’s Long and Winding Road: A Case Study

With Volkswagen claiming the top auto industry spot in Fortune’s annual World’s Most Admired Companies list and The Economist highlighting the Germany automaker’s global ascent, it’s worth taking a look at the tremendous shifts in reputation the company has experienced over the course of its 75-year history.

An Unlikely Origin

It’s hard to imagine today, but VW began as a state-supported operation in Nazi Germany. While Hitler heralded the Beetle as an affordable “people’s car” (in German, volkswagen), VW’s early years did not live up to that reputation. “Only 630 Beetles were made there during World War II—and distributed to the privileged,” according to Der Spiegel.

A Reputation Reborn

Demand for Beetles during the occupation kept VW alive following World War II, but there was little international interest. After looking at the company as a possible acquisition, the CEO of Ford, for instance, famously concluded that VW wasn’t “worth a damn.” But over the coming years Beetle’s popularity made it a symbol of West Germany’s “economic miracle,” and VW’s success was “one of postwar Europe’s most glittering economic achievements,” according to a Time magazine article from 1963. By that year it was the world’s third largest automaker, and less than a decade later the Beetle’s total production count eclipsed Henry Ford’s Model-T.

Transformation: from “Hitler’s car” to “Beetlemania”

Upon its initial introduction in the United States, VW’s reputation couldn’t escape the Nazi association. “I even tried calling the VW the ‘Victory Wagon’ to take the curse off it, but the press referred to it only as ‘Hitler’s car,’” said Dutch car dealer Ben Pon, who shipped the first Beetles stateside in the late 1940s. Soon, though, New York agency Doyle Dane Bernbach wiped away that stigma with a string of unforgettable advertising campaigns, including “Think Small,” Advertising Age’s top campaign of the century. Emphasizing VW’s impact on an owner’s reputation and image instead of the traditional touting of features, these campaigns were an innovative and influential development in the history of advertising.

Post-Beetle: less risk, but no more mania

When Beetlemania subsided, the void left by such a defining model threatened to undo VW’s reputational gains. Not wanting to repeat the same mistake, the company unveiled a more diverse series of models, including the Passat, Golf and Polo. Influenced by the technology and luxurious reputation of Audi, which VW acquired in 1964, these cars prevented its image from flat lining but ushered in an extended period of mixed results. Things began to look brighter by the turn of the new millennium, as Audi’s jump to the luxury class occupied by BMW and Mercedes-Benz gave VW’s reputation a boost in the same direction.

Poised for a boom

Reputation continues to be a major factor in VW’s latest global endeavors. In many countries “it has been around long enough to be seen as a domestic firm, so protectionists usually leave it alone,” according to The Economist. Its longstanding reputation in China has also helped distinguish it from pack in the world’s largest auto market. “VW bet on China nearly 30 years ago,” The Economist notes. “A glut of cheap cars is hurting prices in China but VW’s premium models are doing well.”

Protecting its image will be crucial for the VW’s future success, and The Economist article highlights a variety of obstacles that could stand in its way. But VW isn’t standing on the sideline. Its crowdsourced “People’s Car Project” recently engaged China’s drivers, attracting 119,000 ideas and 33 million hits. With that virtual finger on the pulse of its largest market, VW seems well prepared to continue its climb.

Ralph Lauren’s Olympic Uniforms

Ralph Lauren is facing an uproar after it became publicly known that it outsourced the manufacture of the U.S. Olympic Team’s uniforms to China.

The U.S. uniforms in many prior Olympics had been manufactured overseas, as reported by the New York Times. But when the patriotism associated with that event meets a brand with such an all-American image, perceptions change.

That is especially true in this economic environment, when so many Americans face a difficult job market—a market created in part by manufacturing moving to other countries with cheaper labor. Consequently a contract that is standard for most U.S. fashion companies has resulted in a crisis for the company.

Studies show that when companies have a strong reserve of goodwill, they weather such storms. Considering that Ralph Lauren is such an iconic American brand, the odds are in their favor.

A New Guiding Vision for Yahoo

Marissa Mayer

After Scott Thompson’s abrupt departure from Yahoo, ex-Google executive Marissa Mayer has been named the new CEO.  Mayer is now the company’s best chance to arrest its precipitous slide from dominance—she was in fact behind many of the changes at Google that has earned it its leadership position, including working for 11 years to perfect its search engine.

Central to Yahoo’s problems is that it lost its once-strong identity, losing pace with changes in the way the Internet is used since the age of “Web portals” in the late ’90s. Considering Ms. Mayer’s role in Google’s ascension, she may be the perfect executive to reverse Yahoo’s fortunes. We expect to hear about some major changes at the company soon.

Anderson Cooper’s Deft Reputation Management: A Case Study

Anderson CooperEarlier this month CNN’s Anderson Cooper revealed that he is gay in a letter to The Daily Beast’s Andrew Sullivan. According to the Huffington Post, Cooper’s decision to officially come out followed “a long discussion with his team making sure he wasn’t committing career suicide.” With rumors that Cooper may soon marry, that letter could be part of a larger plan to open up about his personal life while closely managing the tone and context of that revelation.

The decision to make the announcement was a good choice. “I’ve always believed that who a reporter votes for, what religion they are, who they love, should not be something they have to discuss publicly,” Cooper states in his letter to Sullivan. But he also acknowledges that keeping his sexual orientation private had the potential to harm his reputation for honest and accurate journalism. “It’s become clear to me that by remaining silent on certain aspects of my personal life for so long, I have given some the mistaken impression that I am trying to hide something –something that makes me uncomfortable, ashamed or even afraid. This is distressing because it is simply not true.”

By choosing to share the news in a thoughtful and eloquent letter to Sullivan, a friend and himself an openly gay journalist, Cooper took control of his message and preempted any threat to his reputation that his previous secrecy had posed. By doing so he was also able to frame the announcement in a way that underscores his values and reputation, both personally and professionally. “I have always been very open and honest about this part of my life with my friends, my family, and my colleagues,” Cooper wrote, adding that he has always tried to keep his private affairs and identity out of his journalism. “I’ve never wanted to be any kind of reporter other than a good one, and I do not desire to promote any cause other than the truth.”

Cooper also minimized the story’s ability to expand by making the announcement while he was in Botswana, out of the reach of the media.

The way Anderson Cooper has handled this is a model of how to get in front of potentially controversial personal issues.  On a broader level, Cooper has set an important example by treating sexual orientation as a subject that is not relevant to public or professional reputation.

Photograph: Tulane University

Seventeen’s Dilemma

We’ve mentioned the backlash against photo retouching. Seventeen magazine has been a touchpoint in that argument. It was the subject of the petition by a 14 year old against retouching that garnered 85,000 signatures.

James F. Thompson of PRNewser points out that it is actually glamour—an idealized version of reality—that Seventeen is selling to its (well, often pre-teen) audience. By abiding by its promise to offer more authenticity it will be taking a tremendous leap of faith, and the effect on sales will be a clear judge of the magazine’s decision, whichever way it goes. Is it true, as Thompson puts it, that “Inevitably the real world prevails, warts and all”?

Dollars & Sense: the Shareholder Value of Reputation

Major companies currently owe an average of 26% of their market capitalization to their reputations, according to this new study from Echo Research. Looking at around 700 companies in the United States and United Kingdom, the study highlights the considerable impact that reputation can have on shareholder value.

[Read more...]

Rachel Botsman’s Reputation Revolution: Trust Trumps All

Last week at the annual TEDGlobal conference in the Edinburgh, Scotland, social innovator and technology consultant Rachel Botsman posed this question: “If someone asked you for the three words that would sum up your reputation, what would you say?”

Botsman imagines a time where you won’t need to answer with a traditional “elevator pitch,” or even a list of references or credentials. Instead, she sees “a future in which resumes and even credit scores are irrelevant, replaced by an aggregated digital reputation based on our interactions in the collaborative economy,” according to Mashable.

[Read more...]

Barclay’s Crisis

With News Corp’s hacking scandal still percolating through the news and legal system, another totemic British company is facing a reputational crisis—though the response from the two companies could not have been more different.

At the end of last week Barclays was hit with a fine for fixing the LIBOR rate. Rupert Murdoch’s counterpart at the bank, Chairman Marcus Agius, has already announced his resignation, acknowledging that the bank’s reputation has been devastated and that “as chairman I am the ultimate guardian of the bank’s reputation.” Banks are facing many issues – and they seem to be growing rather than contracting.