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Keep your enemies close: this is why your reputation in business is determined by your competitors

Businessman ready to run at start point, Business competition co

Professor Shahzad Ansari

Professor Shahzad Ansari

“It takes 20 years to build a reputation and five minutes to ruin it,” said the billionaire investor Warren Buffett. “If you think about that, you’ll do things differently.”

So if your reputation is so valuable but so fragile, what do you need to do to safeguard and nurture it? Think differently, says Shaz Ansari, Professor of Strategy & Innovation at Cambridge Judge Business School, but also be aware that your audience will probably talk and listen to each other, so you need to have a coordinated plan.

“People tend to talk of reputation as if there is one overall reputation among all those concerned, and talk of people as having a high or low reputation as if that is true across all stakeholders,” he says. Instead different groups of people will often have very contrasting views of a company’s reputation and, more importantly, not only are they different but there are also “spillovers” between key groups as they interact over time.

The conclusions are based on research by Professor Ansari and fellow academics from two French institutes, who tracked 42 contemporary French architecture companies over a 30-year period from 1978 in order to get a detailed picture of how corporate reputations develop. They looked at how their reputations evolved among three key groups – peers (rival companies), clients, and critics –and found that not only were those reputations often different but that they interacted with each other, generating mainly – but not always – positive spillovers.

For example they found that respect from one’s competitors was very important, as it tended to reinforce the company’s reputation in terms of potential clients and independent critics. Equally, good critical write-ups tended to boost the reputation among the company’s peers.

Anthony Issroff, founder and director of Mange, an event catering company whose clients include American Express, Land Securities and Hugo Boss, says his company has built its reputation on personal recommendations. He focuses on ensuring he maintains his reputation among different clients groups, ranging from fashion to retails to architects and construction firms, as well as with particular venues that can generate work with new clients.

“We very much value our relationships with venues, from unique small quirky venues to large arts centres, as these relationships naturally generate work and venue-finding forms part of the ancillary production services we offer,” he says. “Virtually all our new business is a result of recommendations, whether it be from venues, customers in similar industries, or simply individuals attending a corporate or private event.”

Reputational cage

The one negative link that Ansari identified was between critics and both experts and peers. When companies become highly reputable among clients, the degree of novelty and avant-gardism tended to decrease, which lowered the interest levels among critics whose role it is to identify and promote these criteria of innovativeness. “Sometimes when people get overly popular, they also take a hit in the peer group because they think ‘these guys are a sell out because they are only catering for the flavour of the day’,” Ansari says.

Tom Young, founder of Tom Young Architects and who works on domestic architecture, small-and-medium scale commercial building, and urban design, agrees that firms in the creative sector have huge reputational issues if they become successful. “It is a trap being successful; you acquire an identity or brand related to that,” he says. “While you go through a formative process, once you become successful you can become very nervous about leaving a successful format behind. It becomes a reputational cage.”

Managers therefore need to think about which categories of reputation they wish to nurture, says Ansari. “You need to consider who your key stakeholder is in terms of your reputation and whose opinion you value and seek that out.” For example Hollywood filmmakers can pursue market reputation (box office sales) or experts (rave reviews in newspapers and websites) or their peers (winning a prize at Cannes). “It depends on your objective and which type of reputation you wish to develop among which types of stakeholder. It’s not always an ‘either/or’ as you could make a blockbuster that got praised by peers and critics but often they are not correlated,” he said.

Companies therefore need to watch out for how the reputations among their core partners interact with each other. “A company should not just focus on the stakeholder that it believes to be the most strategic, such as clients, but should instead value a combination of stakeholders,” he said.

He said that firms needed to continually manage the complexity of enhancing their reputation with one valued stakeholder that may undermine the reputation with another valued stakeholder. “It is a continuous juggling, balancing act rather than a single outcome by saying ‘I have got the balance right’,” he said. “Managing this balance is complex.”