Strategy and Risk: New Relationships among Governance

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Marketing (Formerly Marketing and Law) School of Management

7-13-2006

Strategy and Risk: New Relationships amongGovernance, Brand and LeadershipNicholas ImparatoUniversity of San Francisco, [email protected]

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Recommended CitationImparato, Nicholas, "Strategy and Risk: New Relationships among Governance, Brand and Leadership" (2006). Marketing (FormerlyMarketing and Law). Paper 5.http://repository.usfca.edu/ml/5

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Strategy and Risk: New Strategy and Risk: New Relationships among Governance, Relationships among Governance,

Brand and LeadershipBrand and LeadershipCorporate Responsibility and Global Corporate Responsibility and Global

Business Conference: Implications for Business Conference: Implications for Corporate and Marketing StrategyCorporate and Marketing Strategy

London Business SchoolLondon Business SchoolJuly 13, 2006July 13, 2006Nicholas ImparatoNicholas Imparato

Professor, University of San FranciscoProfessor, University of San Francisco

Research Fellow, Hoover Institution, Stanford UniversityResearch Fellow, Hoover Institution, Stanford University

©© Nicholas Imparato, 2006. All rights reservedNicholas Imparato, 2006. All rights reserved2

A competitive product or a A competitive product or a competitive strategy is not the competitive strategy is not the same thing as a competitive same thing as a competitive

organization.organization.


THE RISE OF INTANGIBLE ASSETSTHE RISE OF INTANGIBLE ASSETS

Kenton, Christopher, “Value Beyond the Balance Sheet,”Businessweek, February 1, 2005

Company Market Value75%

25%25%

75%

1980 2005

Tangible Intangible


MicrosoftMicrosoftGoodwill reportedGoodwill reportedBrand not reportedBrand not reported11

Current Market Cap: $260BCurrent Market Cap: $260B22

Current Brand Value: $60BCurrent Brand Value: $60B33

PepsiCoPepsiCoGoodwill reportedGoodwill reportedBrand reportedBrand reported44

Current Market Cap: $95BCurrent Market Cap: $95B55

Current Brand Value: $12BCurrent Brand Value: $12B3,63,6

1. Microsoft 2005 Annual Report

2. Yahoo Finance: http://finance.yahoo.com/q?s=MSFT&d=t

3. Berner, Robert & David Kiley, Global Brands, Business Week, July 2005

4. PepsiCo 2004 Annual Report

5. Yahoo Finance: http://finance.yahoo.com/q?s=PEP&d=t

6. Pepsi Brand

Financial Statement Reporting Financial Statement Reporting Brand ValueBrand Value

Adapted from “Brand and the Non-market,” Rachel Kolenda, Steve Lindheim and George DeVries, MBA Program, USF, 2005.


MARKET FORCES NON-MARKET FORCES

Advertising

PR

BlogsPolitics

Non-compliance Issues

Public Opinion

Government Regulation

New Product Development

Security Breaches

Customer Fan Groups Internet

Competitors

Suppliers

Distributors

Analysts

Customer ServiceE-

business

NGOs

Brand Valuation DriversBrand Valuation Drivers



(1) Thies, Clifford S. “The Demise of Arthur Anderson” http://www.gold-eagle.com/editorials_02/thies041502.html

Why Companies Left Why Companies Left (1)(1)



Equity Markets

Institutional Investors

Yesterday Today

Equity Markets

Institutional Investors

Capital MarketsCapital Markets


Corporate DisciplineCorporate Discipline

The Firm

Government

Civil Society

Markets


1“Thirty-One Privacy and Civil Liberties Organizations Urge Google to Suspend Gmail” http://www.privacyrights.org. Accessed on 11/1/2005.

GmailGmail Complaint CoComplaint Co--signatoriessignatories11

Australian Privacy Foundation Australian Privacy Foundation Grayson Barber, Privacy AdvocateGrayson Barber, Privacy AdvocateBits of Freedom (Netherlands)Bits of Freedom (Netherlands)British Columbia Civil Liberties British Columbia Civil Liberties Association (Canada)Association (Canada)CalegislationCalegislationCASPIAN (Consumers Against CASPIAN (Consumers Against Supermarket Privacy Invasion) Supermarket Privacy Invasion) Consumer ActionConsumer ActionConsumer Federation of AmericaConsumer Federation of AmericaConsumer Federation of CaliforniaConsumer Federation of CaliforniaConsumer Task Force for Automotive Consumer Task Force for Automotive IssuesIssuesElectronic Privacy Information CenterElectronic Privacy Information CenterFederaciFederacióónn de de ConsumidoresConsumidores en en AcciAccióónn(FACUA) (Spain)(FACUA) (Spain)Foundation for Information Policy Foundation for Information Policy Research (United Kingdom)Research (United Kingdom)Mari Frank, Esq., Author of Identity Mari Frank, Esq., Author of Identity Theft Survival KitTheft Survival Kit

SimsonSimson L. L. GarfinkelGarfinkel, Author of , Author of Database NationDatabase NationEdward Hasbrouck, Author and Edward Hasbrouck, Author and Consumer AdvocateConsumer AdvocateMassachusetts Consumer Assistance Massachusetts Consumer Assistance CouncilCouncilMassachusetts Consumers' CoalitionMassachusetts Consumers' CoalitionNational Association of Consumer National Association of Consumer Agency Administrators (NACAA)Agency Administrators (NACAA)National Consumers League National Consumers League PrivacyActivismPrivacyActivismPrivacy International (United Privacy International (United Kingdom)Kingdom)Privacy Rights Now CoalitionPrivacy Rights Now CoalitionPrivacy TimesPrivacy TimesPrivate Citizen, Inc.Private Citizen, Inc.PrivaterraPrivaterra (Canada) (Canada) Public Information Research, Inc.Public Information Research, Inc.Utility Consumers' Action NetworkUtility Consumers' Action Network

Adapted from “NGO’s and the Non-Market,” Monette Kaylani and Greg Pedersen, MBA Program, USF, 2005.



Ponemon Institute Survey of 51,000 victims, sponsored by White & Case LLS 2005

Cost of Security BreachesCost of Security Breaches

Nearly 20% of victims terminated their Nearly 20% of victims terminated their relationships with the company relationships with the company immediatelyimmediately

40% were considering terminating40% were considering terminating

5% hired lawyers to seek legal recourse5% hired lawyers to seek legal recourse



Highlights of Program and Highlights of Program and Current Study MethodologyCurrent Study Methodology

•• Phase 1: InPhase 1: In--depth interviews with prominent CEOs, thought depth interviews with prominent CEOs, thought leaders (principal investigator)leaders (principal investigator)

•• Phase 2: 300 interviews by experienced brand valuation Phase 2: 300 interviews by experienced brand valuation firm (firm (CoreBrandCoreBrand))

•• Corporate Branding IndexCorporate Branding Index®®, Unique database of 1200 , Unique database of 1200 companies across 47 industries, 12,000 interviews per yearcompanies across 47 industries, 12,000 interviews per year

•• Proprietary algorithm measuring brand equity, Proprietary algorithm measuring brand equity, incorporating economic and financial performance data as incorporating economic and financial performance data as well as image surveyswell as image surveys

•• 15 years of data15 years of data


Highlights of Program and Highlights of Program and Current Study Methodology (cont.)Current Study Methodology (cont.)Brand strength reflects perceptions of reputation, Brand strength reflects perceptions of reputation, management and investment potential management and investment potential (Corporate Branding Index(Corporate Branding Index®®))

40 sample firms, 3 sectors: Finance (21), Retail 40 sample firms, 3 sectors: Finance (21), Retail (8) and Healthcare (19)(8) and Healthcare (19)

Subject of interest: relationships among true Subject of interest: relationships among true believers/strong endorsersbelievers/strong endorsers

Phases 3Phases 3--4: Further interviews and survey 4: Further interviews and survey samples with new protocols, data analysessamples with new protocols, data analyses


Industry/Sector Analyses: True Industry/Sector Analyses: True Believers/Strong EndorsersBelievers/Strong Endorsers

AggregateAggregate 35.235.2

FinanceFinance 26.226.2

RetailRetail 70.370.3

HealthcareHealthcare 26.926.9

Brand Strength (Image)







Protecting customer information







Align privacy and IT with business objectives


Relationship Between Brand Relationship Between Brand Strength and Customer PrivacyStrength and Customer Privacy

True Believers/Strong Endorser relationships True Believers/Strong Endorser relationships between protection of customer information and between protection of customer information and each of the image components of brand strength each of the image components of brand strength (aggregate sample):(aggregate sample):

Overall reputationOverall reputation .72.72Quality of managementQuality of management .80.80Investment potentialInvestment potential .71.71


True Believers/Strong Endorsers True Believers/Strong Endorsers RelationshipsRelationships

Perception that the firm does a good job in Perception that the firm does a good job in balancing the needs of various stakeholders balancing the needs of various stakeholders correlates with each image component of brand correlates with each image component of brand strength:strength:

Overall reputationOverall reputation .50.50Quality of managementQuality of management .50.50Investment potentialInvestment potential .63.63


ProfitProfit

ROE =Net Income

Assetsx Leverage


Self Perpetuating Cycle of Self Perpetuating Cycle of Innovation and InvestmentInnovation and Investment

•Stronger investor reaction

•Venture financing

•Enabling technologies proliferate

•Appetite for disruptive technology increases

•Growing consumer buzz

•Heightened dependency

•Passionate enthusiasts

•Explosive growth in new products and services

•Non-market response

•Corporate resilience


Governance and Leadership: Governance and Leadership: Data Governance IllustrationData Governance IllustrationAdopt new security technologies, quickerAdopt new security technologies, quicker

Defend assumption of corporate liabilityDefend assumption of corporate liability

Advocate tax policy for security investmentAdvocate tax policy for security investment

Accommodate competing interestsAccommodate competing interests

Advance international cooperationAdvance international cooperation

(and always, walk the talk, as in security policy (and always, walk the talk, as in security policy versus social engineering)versus social engineering)


History punishes those who come late.History punishes those who come late.

Russian ProverbRussian Proverb


Thank you!Thank you!


Contact InformationContact Information

Nicholas Imparato PhD.ProfessorSchool of Business and Management2130 Fulton StreetSan Francisco, CA [email protected]

Nicholas Imparato PhD.Research FellowHoover InstitutionStanford UniversityStanford, CA [email protected]



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Strategy and Risk: New Relationships among Governance