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Reputation Management: Could Amazon Be Damaged?

January 19, 2011

How many fewer books will Amazon sell due to its sister company’s (cloud computing provider, Amazon EC2) decision to host 250,000 secret documents for WikiLeaks? This is the question the board of Amazon the bookseller must be asking. They must also be considering the potentially enormous reputation damage that twitter comments, such as ‘Amazon is a Traitor’, will have on their business.

The denial of service attacks on WikiLeaks, somebody trying to bring down the organisation’s internet servers, must have seemed like a marketing gift for an online retailer of Internet-based computing and storage services. As long as WikiLeaks had a credit card, they could move the hundreds of thousands of documents to Amazon’s EC2 service and have them up and running in just a few minutes. Newspapers around the world reported that after being attacked and brought down, Amazon rode to the rescue on an internet powered steed.

Just 24 hours later, Amazon EC2 had to bring down the site after the Secretary of State, Hillary Clinton, The WhiteHouse and Senators came out against the company’s ‘support’ of an unprecedented leak of American secrets.

When Connecticut Senator Joe Leiberman, the chairman of the Senate Homeland Security Committee, publicly states that he “…wished that Amazon had taken this action earlier based on WikiLeaks’ previous publication of classified material,” you have to think that this is not going to be your company’s finest reputation moment – but, while Amazon EC2 will have to lick their self-inflicted wounds, what damage will this have done to the overall Amazon brand?

Yes, those in favour of free speech will think that Amazon caved in to US government pressure, and that WikiLeaks is leaking something we should already know. However, would your average book-buying American have thought less kindly about Kindle this Christmas?

Amazon’s decision to handle WikiLeaks should have been evaluated against the balanced effects of its ‘license to operate’ in the US market, versus the additional cloud computing sales it might generate by demonstrating its ability to quickly support an organisation’s dynamic needs. Presumably, somebody in Amazon would have taken a decision based on the fact that its global market was more valuable than the segment of those customers that would regard its actions as being unpatriotic towards US interests.

In the 90’s, BA got it horribly wrong when they decided to paint out the British Union Jack from the tail fins of its planes and replace it with artistic patterns by global artists. They miscalculated the negative impact this would have on their loyal British consumer base. Mrs Thatcher was furious, business travelers threatened to take their business elsewhere and BA realized their expensive mistake too late.

A reputation model must be based on a careful analysis of a company’s stakeholders where there is an exchange of value; customers part with their cash in the expectation of a service or product, society grants the license to operate in the belief that a company will act ethically, and so on. When this value exchange is in equilibrium, the company is well placed to ride out the harshest trading conditions. However, when there is an imbalance, then the reputation can be damaged with serious financial implications, like BP in the Gulf of Mexico, like Rolls Royce with its allegedly defective engines, like Serco and its decision to seek rebates from suppliers, like a supermarket retailer that is seen to destroy village shopkeepers’ livelihoods.

In large organisations, where one brand covers many business units or product lines, the actions of one hand can dramatically impact the other. Amazon’s online bookselling side is by far the biggest business, but has the actions of its hi-tech sister company harmed its revenues and reputation for a period remembered much longer than what the Americans think of the French President or Prince Andrew?

Companies that ignore the reputational equilibrium do so at their peril.

Dr Glen Peters is a Fellow at SAMI and is author of the best selling book on reputation, Waltzing with the Raptors. To find out more on SAMI Consulting’s expertise in Reputation Management visit http://www.samiconsulting.co.uk



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