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How Risk Management Helps Protect Your Brand Reputation

Thomas Frenehard

In anticipation of SAPinsider GRC2016 in Las Vegas in a few weeks, I wanted to share with you some highlights from one of the presentations that I’ll be delivering: Managing Reputational Risk to Protect Brand Value.

We’ve all heard the Warren Buffet quote: “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

But there is another one that I think is even more appropriate: “Lose money for the firm and I will be understanding, lose a shred of reputation for the firm and I will be ruthless.”

A reputational impact can have many direct consequences, including:

  • Drop in sales: Customers no longer want to be associated with your brand
  • Drop in share prices: Because of uncertainties on sales and revenue, investors shy away from the company
  • Conflictual shareholders’ and board’s relationships: With a drop in share price, shareholders’ interests are affected and they hold the board accountable

Reputational risk is therefore not just a marketing issue; it can be a credibility problem and a business killer.

One of the major issues with reputational risk is that it spans across numerous stakeholders – customers and investors, of course, but also analysts, media, regulators and control authorities, NGOs, partners, third parties, and (let’s not forget) employees themselves.

Until recently, its velocity – the speed at which it manifests – was quite manageable, because unless it was a major crisis published in a newspaper, it was spread by word of mouth. Replace this with today’s exponential social media reach and it becomes clear why this is now a critical risk to consider.

I don’t claim to have the absolute solution, but I would suggest an approach to manage reputational risk. Use the Plan-Do-Check-Act Cycle that business continuity managers know very well.

Plan: Prepare your governance for ethics and compliance

In this first step, I suggest assessing the current situation: what already exists? From there, formalize the governance structure that will issue the risk policies. In this phase, you would also prepare a crisis plan and communicate it to all stakeholders.

As for any policy, I recommend not only ensuring acknowledgement, but also understanding by all the recipients.

Do: Formalize your risk and control framework

This second step is about documenting what could go wrong – the risks and potential occurrence scenarios – and then defining a sound mitigation strategy to address each case depending on how critical it is. My suggestion here is to assess the effectiveness of each response. A communication plan will help you reduce impact over time, but it won’t prevent a deficient product from reaching shelves in stores in the first place.

Check: Continuously monitor threat levels

Risk context changes all the time. Review the threat levels by taking into account any new incident or near miss recorded. Also, define appropriate indicators that can notify you of any adverse trend so that you’re never caught off guard.

Do people start propagating rumors about your company? Get to know soon so that you can decide proactively what to do instead of being rushed into action.

Act: Take action (or not!) but always communicate

Give your executives, including marketing and communications managers, the tools they need to be able to perform a guided decision on up-to-date risk information. Keep all the stakeholders up to date on the decision, and name a spokesperson. There is nothing worse than discordant messages.

Reap the benefits!

It’s not just all negative. Companies with strong brands have repeatedly shown:

  • Facilitated recruitment of talents
  • Increased and sustainable investor and business partner confidence
  • Customer loyalty
  • Top management stability

What about you? How do you manage this critical asset?

I look forward to reading your thoughts and comments either on this blog or on Twitter (@TFrenehard)!

For more insight on protecting your brand reputation, see This One Mistake Could Cost You Billions.

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What Support Looks Like In The Era Of The Cloud And The Internet Of Things

Fred Isbell

As we near the end of this year’s spring event season, one thing is clear: Digital transformation is in the air.  The annual SAPPHIRE NOW and ASUG events are now behind us, but people are still buzzing about the sessions, stories, lessons learned, and best practices shared. There’s profound interest in how innovations are adopted, such as running a Live Business, digital boardrooms, and enabling the latest technology.

After listening to customers, practitioners, and analytics throughout the first half of this year, I was inspired to invite the following panel of subject-matter experts for the third installment of a webcast series sponsored by Digital Business Services from SAP:

  • Elaina Stergiades, research manager of IDC Software and Hardware Support Services
  • Michael Rieder, senior vice president and global head of SAP Enterprise Support & Premium Engagements
  • Sei Drake, chief architect of Co-Engineering and Innovation at SAP America

To kick off the conversation, we discussed the rise of the 3rd Platform that IDC says is a factor driving growth of innovations, new business opportunities, and more. Yes, digital transformation is front and center, but with it comes a need for simplification, not increased complexity. And on top of it, there’s an incredible explosion of data from a variety of places, including the fast-accelerating Internet of Things (IoT).

What should businesses do? The idea of tackling these issues and providing the support needed to succeed is reminiscent of Edvard Munch’s “The Scream” painting!

Future of Support-1

According to Elaina Stergiades, the promise of the 3rd Platform and the evolution of solutions that support it are transformational. Moving away from a reactive, manually intensive, and linear process, businesses are steadily adopting a proactive and more predictive model. In fact, this new brave world is bringing great technology to innovate the support process and customer experience, including:

  • Cloud solutions: Delivers wider access to support data from anywhere to share across the entire user experience and with new levels of integration
  • Social technology: Supports collaboration far above traditional hierarchical (and inherently slower) support processes
  • Enterprise mobility: Enables support monitoring anywhere and remote support and resolution without traditional, closed boundaries
  • Predictive analytics: Forecasts issues before they reach crisis level while offering a better and more direct, personal response

Michael Rieder continued the discussion with insightful observations about the market dynamics that businesses are facing. He supported Elaina’s perspective and the need for proactive support for on-premises, cloud, and hybrid environments. He noted that it is critical for businesses to reimagine support by keeping six foundational pillars in mind:

  • Mission-critical support
  • Total cost of ownership
  • Continuous improvement
  • Accelerated innovation
  • Integrated support
  • Business service support

Sei Drake has weighed in on this topic before in his blog post on “How to Prepare Your IT Landscape for the Digital Economy.” From his perspective, the evolution of support is happening against the backdrop of changes in the IT industry and the marketplace. The rise of cloud-based solutions and the growth of the Internet of Things (IoT) are bringing a whole host of new considerations, especially the need for DevOps and co-innovation. We found his suggestions for customers’ considerations quite helpful with examples across several industries.

Like the webcasts I hosted before it – Unlocking the Potential from the Internet of Things and Transforming Digital Visions into Reality – this third in our series was another insightful thought-leadership webcast from Digital Business Services. Be sure to view the on-demand replay and share with your colleagues.

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About Fred Isbell

Fred Isbell is the Senior Director of SAP Digital Business Services Marketing at SAP. He is an experienced, results- and goal-oriented senior marketing executive with broad and extensive experience & expertise in high technology and marketing. He has a BA from Yale and an MBA from the Duke Fuqua School of Business.

The Internet Of Things And The Explosion Of Life At The Periphery [INFOGRAPHIC]

Kai Goerlich

Facts about the Internet of Things (IoT) are clear and have been widely published. The number of IoT sensors will grow to 50 billion by 2020, according to Cisco, and Intel estimates that we’ll have 200 billion Internet-connected things by 2030. Data will be the new sunlight as we create, replicate, and consume 44 zettabytes (or 44 trillion gigabytes) of data by 2030, according to EMC and IDC. And as if all this wasn’t enough, the speed of analytics will intensify thirty-fold by 2030 – with 95% of queries answered in mere milliseconds, according to SAP estimates.

If these trends continue (and they likely will), our lives will soon be powered by ambient computing, where most things, devices, and machines sense the world around us, communicate and analyze data, and more or less, act independently.

Although most organizations still classically store and analyze their data on laptops, smartphones, and data centers inside and outside the cloud, it’s safe to assume that data collection and analytics will eventually move into the periphery as well, at least partly. For example, smart machines – such as those used in connected vehicles – generate a massive amount of data, and we have yet to make most things intelligent.

The opportunity is boundless.

Economic impacts within your reach

Most of us who have spent a lifetime in the traditional IT industry will find it difficult to consider how an ambient computing economy and society will operate and appear. Even millennials born into the age of smartphones will probably be surprised when the focus shifts from the phone as the primary device to other levels.

We know from evolution and chaos theories that the highest level of creativity reveals itself within a system’s border. Because we are creating new boundaries for the IoT right now, businesses will eventually explode at the periphery of their current IT and business systems. In fact, the IoT will fundamentally create more sensors and receptors on the outside of our business systems, allowing us to gather and analyze more and better data. And as we cooperate with other companies and organizations to share this information, new business models will emerge with unprecedented diversity.

In the short term, changes are happening across strategic asset management, customer and consumer experience, product management, and services – bringing savings through lower carbon emissions, improved asset management, reduced replenishments, and downtime prevention, among others. However, over the long term, IDC research indicates that nearly 25% of all companies view the IoT as strategic and over 30% of industry leaders believe they will be disrupted by it at some point.

The economic impact will only become more significant as our reliance on the IoT grows. And when it comes to long-term transformation, you’ll know where to look: The periphery.

IoT and Digital Transformation

For more on how our increasingly connected world is changing lives, see Three Ways The Internet Of Things Can Improve Citizens’ Lives.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Idea Director of Thought Leadership at SAP. His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

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qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Sherry Turkle: We Need to Talk

Stephanie Overby

reclaiming-conversation-sherry-turkle-200x300MIT psychologist Sherry Turkle on why we need to talk to our colleagues

Human beings are communicating more often and with more people than ever before, thanks to the digital devices we are all but tethered to. But the art of conversation is in decline. MIT psychologist Sherry Turkle, who has devoted her career to examining the impact of technology on human interaction, lays out some worrying consequences in her latest book, Reclaiming Conversation: The Power of Talk in a Digital Age. Overreliance on digital communication has not only affected our ability to have effective face-to-face exchanges but has also diminished our capacity for empathy and intimacy. In addition, digital discussions are often less productive and effective than in-person interactions.

We talked to Turkle about the value of human interaction that is unmediated by technology, when to choose talking over texts and e-mail, and how corporate leaders can revive conversation in the digital workplace.

Q: The big trend in business is digital transformation. A major goal is to automate and digitize interactions. What are companies losing in the bargain?

Sherry Turkle: When you want to build trust, when you want to get to know someone new, when you want to seal a deal—these are not moments for transactions, which are fairly blunt and objective instruments for communicating information. These are times for conversations, which are subjective and emotional and enable greater understanding. Good managers need to know when they are dealing with a moment when a transaction is appropriate and when it is a moment for a human exchange. If you try to be transactional when you need a conversation, you are on your way to frustration, disappointing results, and—most often—the need to do it all again.

Q: How has the increase in digital communications affected our ability to talk to each other?

Turkle: We find ways to not have the conversations that count. We would rather keep communication on screens. As one young man told me when I asked what was wrong with conversation: “It takes place in real time, and you can’t control what you’re going to say!” Of course, that is what’s “wrong” with conversation. But, it is also what’s profoundly right with conversation. It is a place where intimacy is born. The link between face-to-face conversation and empathy is strong. There has been a 40% decline in empathy among college students over the past 20 years, with most of that decline happening in the past decade.

Q: Why is face-to-face conversation important in business? Can’t that  effectively be simulated using technology?

Turkle: We are creatures designed for broadband, rich, nuanced exchange through our voices and faces. We are inventing new languages on the screen, and we are doing that with invention, wit, and nuance. But in business (as in friendship and love), we are misunderstanding each other—badly. And we are sending 10 e-mails where a brief call would do.

I am a pragmatist. When you need a video link or a call, use these tools. But what I see is people avoiding presence when it is possible.

Q: How can managers make a business case for talking?

Turkle: Research shows that conversation is good for the bottom line. People are more productive, creative, and engaged with their work when they have time for face. to-face talk. Sociologist Ben Waber had employees wear “sociometric badges” that measured their conversational patterns. When people were given coffee breaks together, performance improved. One CEO I interviewed instituted a breakfast meeting for his team. It gave them all an opportunity to share ideas and talk freely. Group productivity increased, and they needed fewer formal meetings.

One “easy” change is to eliminate devices from in-person meetings. The research is clear: devices distract. They diminish conversations and the relationships among participants. Make meetings shorter if necessary. Offer breaks. Designate one employee to notify attendees if an emergency arises. A meeting is a time to meet.

Q: What else can leaders do to encourage conversation amid the pressure to digitize?

Turkle: Make it clear that in your organization being online is not how you show your loyalty. Instead, show that what is valued is an employee who picks up the phone. Visit your colleagues in person. If you talk, others will talk. Also, design the workplace for conversation by creating device-free spaces that encourage it. Help employees work through their terror of real- time conversations by making it clear that revealing your thought process is valued. Finally, be less transactional. Begin an answer to an e-mail by saying, “I’m thinking.” It’s a powerful message. Complicated problems require thinking and then time to talk.

Q: We conducted this interview electronically to accommodate our schedules. What did I miss out on? How about you?

Turkle: We missed out on the chance to know each other better. What we had was a transaction. I took the time to lay out some of my ideas. But you and I are not closer for it. In business, this would not put us in the best relationship to move forward with a project. Now would be time for conversation!

 

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