June 09, 2010
Ken Silverstein
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BP's nightmare is of its own making. But it didn't have to be that way. The massive oil spill in the Gulf of Mexico underscores the dilemma of not actually backing up an advertising slogan with the appropriate actions.
While branding is about creating a corporate image, it's also about carrying through with the implicit and explicit promises that are made in that outreach program. It's about taking the message beyond the four walls of a company and into the marketplace which could, in turn, embrace the mission. If done right, it not only conveys a company's goals but it will also help improve the bottom line.
"Strong brands drive total shareholder returns," say McKinsey Solutions. "Most winning brands build their strength by creating an emotional bond with customers. While advertising and marketing communications always play an important role in creating this bond, winning brands match this personality with distinctive delivery at critical brand triggers -- the two or three key aspects of the overall brand promise that must be delivered consistently and effectively."
In the case of utilities, it can translate into customers giving them some slack and even to weather the most severe storms. A utility may get hit with a lawsuit centering on its emission levels. And while the public may be quick to buy into the notion that utilities generally are more concerned with profits than cleaning the air, it may also think that its own provider has been proven to be a good corporate citizen.
Duke Energy, for example, is one of the largest users of coal-fired generation. But it's also a supporter of reasoned carbon emission reductions and a participant in several environmentally-conscious programs. CoreBrand, which looks at utility brands and which has called Duke's marketing efforts a success, says that those benefits are reflected in the overall market cap by 5-7 percent.
BP's situation is interesting. That is, around 2000 it had spent hundreds of millions remaking and transforming itself from British Petroleum to Beyond Petroleum. And it received credit from many consumers as it invested in solar projects and acknowledged what it says is a direct link between fossil fuels and man-made global warming.
But critics say that the company has forsaken that mission and instead has begun to focus more on maximizing its oil drilling programs. And with hundreds of rigs in the Gulf of Mexico, it could have certainly foreseen the potential of a massive oil leak and taken the precautionary steps in advance to mitigate or prevent damages. Instead, it is dealing with what has been termed the worst offshore oil disaster in this country's history.
"BP had played a game of smoke and mirrors," writes Wood Turner, executive director of Climate Counts, in his blog. "There was no corporate culture shift in 'Beyond Petroleum.' It was cultural disdain."
Reputational Risks
At first, it appeared the oil spill would be small and manageable. At least that was the impression that BP had given. It's only when consumers learned that the leak was immeasurable did the tide turn against the oil company.
The philosophy and the purpose of an enterprise begin with its mission statement. It is the main covenant by which everyone in an organization must live. If workers have questions, they must look first to guiding principles. Those values must then be internalized not just by employees but also by vendors, consumers and communities.
"Of course the actual efficacy of BP's containment and cleanup efforts matters most," says Eric Pinckert, managing director for BrandCulture Co. "But from a brand and reputation standpoint, how hard they’ve tried matters too."
In the case of BP, it has vowed to pay for the cost of clean up but the Gulf region is unconvinced. As CoreBrand's chief executive James Gregory writes in Branding Strategy Insider, BP will now be blamed for every dead fish or bird that washes up.
The question becomes how to turn this around. Luckily for BP, examples abound. But words alone are insufficient. It's about taking immediate and meaningful action. The head guy must get out early and often, reassuring those who have been hurt that the company will rectify the situation. If the spokespeople do not have answers, they should say as much. That is BP's second biggest mistake, after skimping on shut-off valves that should have prevented the explosion..
Consider the Tennessee Valley Authority, which is still reeling from the coal ash spill at one of its dams two years ago -- an event that has led the Environmental Protection Agency to propose the rewriting of the nation's coal ash rules. TVA has been out front trying to assure its local constituencies and is taking steps ahead of the regulator's actions that would reduce the chance of such an accident happening again.
Like TVA, BP has a long road ahead of it. It has to first stop this oil leak. Then it has to clean it up and compensate the surrounding communities. The company just recently said it would commit up to $500 million to study the affect that the spill has had on marine life and shoreline environment in the Gulf area.
"BP has made a commitment to doing everything we can to lessen the impact of this tragic incident on the people and environment of the Gulf Coast," says Tony Hayward, BP's chief executive. "We must make every effort to understand that impact. This will be a key part of the process of restoration, and for improving the industry response capability for the future."
BP's branding campaign in the early part of the decade had begun to transform its image. But the company has unfortunately failed to fulfill its promises. Now BP must try to remake itself again. This time it will be to assure its long-term survival.
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