Idea Watch

We know risk is the potential of losing something of value. Values (such as physical health, social status, emotional well being or financial wealth) can be gained or lost when taking risk resulting from a given action, activity and/or inaction, foreseen or unforeseen.

We can assess risk by:

• Right balance between risk and reward
• Focus on decisions not process
•  Make employees the first line of defense

What is brand risk?

We can define brand risk as threats to the brand equity or threats to the brand differentiators that make consumers choose one product or service over the other. Thus brand risk can be defined as anything that threatens:

1. The sustainability of current and future demand for a company’s product or service.

2. The company’s commercial freedom.

Customer Eccentricity:

Ø  Fortune 500 firms like Intel , IBM & American Express have focused their structures on customer segments rather than products.

Ø  CEOS should look carefully at the competitive landscape before embarking on a customer-centric restructuring & make sure everyone understands that performance will sag before it rises.

Ø  Sometimes the gains never materialize ; this happens when customers' needs or when customers are indifferent to greater customization & responsiveness.

Ø  Eg ; Firms that went for this approach saw an average increase of 11% after 3 years , average drop during restructuring 39%

Ø  Amazon , Tesco , UPS , USAA ,Traders Joe , Apple are all customer-centric firms.

Compensation:

Strong Brands and weak pay:

CEOS are typically the most prominent members of their organizations , so for them the self enhancement from brand association is particularly robust. If top executives are prepared to accept lower pay for the privilege of running firms with strong brands, pay levels can be grounded to some extent. E.g.: According to S&P’s Execucomp database : CEOs’ pay dropped by 12% for each standard deviation increase in brand strength, saving their companies an average of $ 1.3 M a year.