How does reputation affect competitive advantage?

How does reputation lead to competitive advantage? 

I reckon in two ways:  Reputation, or let’s say the net effect of all one’s interactions with a brand, provides an identity that becomes a rallying point for employees and makes customers proud to be associated with a company or brand.  They have a clear understanding of what a brand is about and identify with the vision and value system associated with that brand.  Abraham Lincoln would call this the ’tree’.  It’s the real thing and cannot be faked … at least not indefinitely.

Secondly, reputation affects image, or the way others view you – this is Abraham Lincoln’s ‘shadow’ analogy.  A positive image attracts people to you – like prospective employees so you get to choose the best of the bunch, but the same may be said for attracting customers and shareholders.  Image is good for share price.

So a positive reputation helps a company keep its best people, attract and retain good customers, and adds value to the share price as the share takes on an intrinsic value of its own.

Where is the competitive advantage?  Sustainability is key across the triple bottom line – people, planet and profit.  Now if sustainability is important it means that experiential gains from employees, and their interactions with customers, become the means by which input costs are kept low and where one facilitates a premium on pricing. 

Sounds easy? Well it isn’t.  The idea of creating a common vision and value system is ‘Organizational Behaviour 101’ stuff but inculcating it across an organization is the hardest thing you will ever take on.  It’s critical though if it is to lead to that all important reputation and making it really meaningful depends on … you guessed it …. the moral intelligence of an organization or brand. 

Interested?  More next post.