The butterfly effect in reputation management

Something as small as the flutter of a butterfly's wings can ultimately cause a typhoon halfway around the world. Edward N. Lorenz, mathematician and Kyoto Prize Laureate, introduced this widely known and yet often overlooked ‘butterfly effect’.¹

Today’s overcrowded economic context and over communicating media environment are complex systems by their nature. Complex systems are different from complicated ones. A car, a plane, a Swiss watch can be complicated but they are not complex. The traffic in the city is, however, an example of a complex system. In our hyper connected world the unprecedented and increasing complexity paves the way for the butterfly effect. The butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a complex system can result in large differences in a later state. Leaders, managers and executives of global brands have witnessed this effect many times particularly in the realm of reputational crises.

The revolution will not be televised

The revolution will not be televised. It will be triggered from a leak on social media. Even though the first thing that comes to mind when one speaks of revolutions triggered via social media (Occupy Wall St., WikiLeaks, Arab Spring etc.) is about revolutions that are more of political nature, it now applies to transnational corporations as well. It applies to them too because they are just as, if not more, powerful and enormous systems as governments (including military, parties, diplomacy etc). Most importantly, it applies to them too because they are no less complex.

As Martin Riley, ex-CMO of Pernod Ricard warned, in today’s age of democratized media communications every brand can have its own “Tahrir Square or WikiLeaks moment. Any ill-thought-through commercial promotion in Thailand or Peru can come back and bite you in the UK or Australia. Today, brands are only as strong as their weakest link.”² One can easily think of a scenario in which the manufacturing factory in i.e. Bangalore is seen by a tourist-like person who then using a mere smartphone films an underage worker there that was not in the Headquarters’ knowledge. If it wasn’t clear whether supervising this is among the responsibilities of the HR director and if in general other responsibilities of other relevant departments weren’t clarified the ground for such a leak to happen has been prepared. As the enlightened polymath Benjamin Franklin formulated: “By failing to prepare, one is preparing to fail.”

Avoid learning the hard way

It is necessary to make value chains and supply chains transparent in order to take the necessary measures that minimize such risks and threats. While, for instance, Hermès is in many ways a true Purpose-driven brand, the company failed to control its supply chain, which eventually led to an unexpected crisis in 2015. All it took was a short clip posted on YouTube and going viral, showing the cruel slaughtering of crocodiles at a Texan animal farm used for the production of Hermès’ handbags, and the Actress and namesake Jane Birkin (as in ‘Hermès Birkin Bag, going anywhere from a few thousand dollars to $100,000) demanded that Hermès remove her name from the Birkin bag with immediate effect.³ This worsened the impact of the scandal and damaged brand perception and identity at a speed the company was hardly able to keep up with. Hermès began taking the necessary action to prevent such scandals in the future, but it paid a huge price for not extending its Purpose to its entire value chain. It learned the hard way that one small leak in social media can be enough. One short clip and one big effect.

A Matter of when, not a matter of if

The economic and systemic signs indicate that this is the WikiLeaks moment for brands’ reputations. For many global brands, it is not a matter of if but a matter of when. Some of the corporations are aware of this while others aren’t. The aware ones are already investing the necessary energy, time, attention and capital into pro-actively preventing it while others will have to learn the hard way by trying to merely react to it. What the Swiss psychiatrist Dr. Carl Jung figuratively said about humanity in general is now particularly relevant to the world of reputation management. “The world hangs on a thin thread. (…) Assume that a certain fellow, say, in Moscow loses their nerve or their common sense for a bit and the whole world is in firearms and in flames.”

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Sources:

1. The Editors of Encyclopaedia Britannica. “Edward Lorenz.” Encyclopædia Britannica, Encyclopædia Britannica, Inc., 19 May 2019, www.britannica.com/biography/Edward-Lorenz#ref1079997.
2. Charles, Gemma. “Brands Must Guard against 'Wikileak' Moment in Digital Age, Says Pernod Ricard CMO.” Campaign, CampaignUK, 28 Aug. 2014, www.campaignlive.co.uk/article/brands-guard-against-wikileak-moment-digital-age-says-pernod-ricard-cmo/1287257.
3. Gibbs, Alexandra. “Birkin Wants Hermes to Remove Name off Iconic 'Birkin Bag'.” CNBC, CNBC, 5 Aug. 2015, www.cnbc.com/2015/07/29/jane-birkin-requests-hermes-to-remove-name-off-iconic-birkin-bag.html.