Wednesday 20 January 2021 6:00 am

Perception is everything: Why this decade is all about reputation

Harry Shackleton is the founder of Inflect Partners, a strategic communications and business transformation consultancy – www.inflect.co.uk

The last decade has been all about data.

As our digital lives have become inseparable with our offline selves, the power and value of the data that underpins the digital world has exploded.

It is easy to forget that it is only 14 years this month since the launch of the iPhone, and even harder to remember what life was like before we had powerful computers in our pockets connecting us to the world in a couple of taps.

Read more: Is the City set for Big Bang 2.0?

As the media, and even more belatedly individuals, began to realise that digital products offered free at the point of use were perhaps not so costless once you looked under the bonnet, a range of breathless articles started to appear calling data the “new oil”, the “new black”, the “new gold” and, really pushing through the meta looking glass, the “new data”.

Whilst the power of data cannot be questioned and will continue to dominate the world over the decades to come, the 2020s will see a new asset increase in importance across every aspect of our lives: reputation.

Reputation is an intangible thing, hard to build and easy to ruin as the famous Warren Buffet quote goes, but in our information-rich digitally enabled world its importance is skyrocketing.

Research shows that there has been a shift in the makeup of company’s market capitalisation over the past 30 years, from tangible to intangible assets. The bricks and mortar, equipment or stock owned by a company (i.e., actual stuff) used to constitute the lion’s share of a valuation has now been replaced by intangibles such as brand equity, intellectual property and reputation.

As this research from Aon shows this evolution has also changed the types of companies that have the largest market cap, from manufacturers of products like GE, 3M or Proctor and Gamble, to providers of services such as Alphabet, Facebook or Microsoft.

Reputation alone makes up a sizeable portion of this intangible value, with research from global media giant Havas finding the “corporate reputations accounted for 35.3 per cent of total capitalisation of the world’s top 15 stock market indices… with that figure rising to 47 per cent for the UK’s FTSE 100”.

Those figures are significant, accounting for $16.77 trillion in shareholder value according to the research from 2019, and forecast to grow.

It is this inherent value of reputation, underpinned by ever increasing expectations of customers, investors and employees that is fueling the responsible business movement. It is no longer enough to have slick PR to gloss over the negative impact of your activities, you must walk the walk as well as talk the talk. 

And these aren’t changes that are happening in some distant future, they’ve already happened and if you are not focused on them you risk being left behind.

Research shows that 71% of consumers are already seeking out brands whose values align with theirs and a recent survey found that “63% of millennials said the primary purpose of businesses should be “improving society” instead of “generating profit.”

These factors have only increased because of Covid-19 – a staggering 94% of shoppers said they’d stop buying from a company if they didn’t like how they had responded to the pandemic.

And it doesn’t stop there. Regulators are becoming increasingly interventionist, driven by pressure from traditional and social media, and increasingly investigate and clamp down on operators of poor repute.

It’s clear that in the 2020s to maintain your market share, your access to talent and your access to capital you need your reputation to work for you, not against you.

And it affects the data economy too. The #DeleteFacebook movement has taken on renewed energy in 2021 with WhatsApp updates that share even more data with the parent company to build sophisticated advertising models based on your private conversations with friends and loved ones. As we have become savvier to the power of data, how companies use data, manage data privacy and or respond to data breaches are now a key driver of a brand’s reputation.

Investors have long conducted “due diligence” when buying or selling companies, but they rarely considered ‘social value’ as a material aspect to investigate. Today, not only are investors doing so but your customers and current and future employees are doing it too, there really is no place to hide.

But that doesn’t make reputation something to be scared of, it is an asset that you need to look after in the same way business leaders of the past maintained their buildings, machinery or inventory.

It also doesn’t have to take a large in-house team or an expensive consultancy to help you build your reputation, the person who knows your business best is you and always will be. 

Stakeholders prize authenticity above almost everything and can see through shallow marketing efforts that do not align to a brand’s value or activities. Communicating openly, honestly and with integrity is more powerful than anything, your customers, employees and investors will reward you.

If the last decade was the decade of data, then the 2020s is undoubtedly already shaping up to be the ‘Reputation Decade’.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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