Thank you for that introduction.As you heard, I am based here but I do not work in the New Zealand market as Edelman has no fully-owned office here. I am the only employee of the world’s biggest PR firm in the land of the long white cloud. And so my comments today will almost entirely draw on my experiences and examples from other places. Except for one.
The great pickle panic of 95! I did once work here for about 10 months for PR firm Baldwin Boyle Group. BBG had a client Cerebos Greggs. We did the usual mix of corporate and product agency support work. Until one day someone noticed that a machine had managed to break a bottle and drop a lethal shard of glass into some of the jars of that brand’s famous pickles and relishes.We were duly summoned to the factory to meet a white faced CEO Ross Pownall. His nightmare was that he could not with any confidence say how many of his products were ‘contaminated’ in this way. Conceivably, this machine could have been smashing the odd jar and dropping its contents into other jars, which were subsequently filled with his delicious products, for quite some time.And these pickles, relishes, chutneys and sauces were on shelves of every food store in the country and something like 75% of kiwi kitchen shelves. We had him give a press conference in which he stated the problem, apologized, announced a national recall (then the biggest food recall the country had seen), promised full refunds for affected products that were returned and… apologized again. We took full page ads in all media ensuring widespread awareness of the recall details and crucially control of the message and helped managed a retail industry pre-briefing and… the result? Retail partners respected and supported the firm’s efforts and consumers and media gave Ross and the company a hugely generous reaction. Within weeks all the potentially contaminated products were replaced and retailers gave back the shelf space and the brand was ‘re-launched’. It very quickly regained sales and its position as a trusted kiwi staple.So a happy ending. And I am sure you all have your own crisis favourite. We are a bit perverse when it comes to crisis PR folk are we not, because on one hand the pressure and hours are huge. But…… most of us love being, well, important and at the center of things.And if we are honest, for much of the time in our organisations or for our clients, we are not. We are always useful and we manage reputation and support brand and engage employees and all of that helps for the enlightened CEO or CMO, of course it does, but being seriously strategic against business objectives over time is another level entirely.My belief is that we are ready as an industry now to make that leap. To be strategic in a business sense not just a communication sense. Many of you here today will say you are there already and perhaps you are, and of course, more and more are… but most are not. And I mean of course, strategic in a business sense but not just in times of product recall or CEO transition or merger and acquisition but as a management discipline, hard wired into the organization at the top and across all the key functions. And hard-wired in culturally too.But to do that we need to relate what we do to business outcomes and we need to have a voice and view on what the company does as well as what it says about what it does.Why? And why now? Well, things have changed since 1995. When the Cerebos Greggs crisis hit the internet was just only beginning to shake off its scientific origins and become a consumer facing proposition. Imagine handling a crisis with no Twitter, no YouTube videos of consumers pulling pieces of glass out of bottle. So much easier. So much slower!
Many things have changed of course and whilst I don’t intend to go that far back in history, I do want to pick on 8 trends that we see that are changing things for the PR and wider communications industry and, because they are so significant, they are changing things for business too. And just to help you navigate, after the eight trends I will talk about the five behaviours we think companies need to exhibit in this changed environment; then four types of outcomes they can expect to achieve if they do… and outcomes linked to business is the area we have often fallen short in when we try to be strategic at a business level.And finally 3 case studies. So with 8-5-4-3 you will know where you are.
Globally this began in 2008 with the fall of Lehman Brothers and a global financial crisis that effectively bankrupted GM, Royal Bank of Scotland and AIG to name but a few. In many of these cases, financial mismanagement, excessive risk taking and massive hubris were uncovered as the reasons. Trust in Business and the idea that unfettered capitalism was basically good for all because it would create wealth that would eventually trickle down to all died. That idea, intellectualized by Milton Friedman and politically championed by Ronald Regan and Margaret Thatcher and I guess Roger Douglas here is no longer believed in any political mainstream. So in 2009/10 the world (or much of it) turned towards government hoping that regulation and better supervision would restore order to the economies. However, in the US we saw political partisanship take the economy to the brink of bankruptcy when, twice, they could not agree on a budget. In Europe it was even worse as governments failed again and again and again to provide decisive support and action (with the possible exception of the Germans) to avert a Euro crisis that now looks like it will keep Europe in the slow lane for many years to come.Last year in our Edelman Trust Barometer we saw trust in government fall to record lows, and in 17 of the 35 countries we surveyed it was the least trusted institution. Government blew it too.In effect, after the crisis of 2008, as my boss Richard Edelman likes to say, the keys to the car were taken away from business for reckless driving and speeding and then, the new designated driver, government, took the wheel and promptly drove straight off the road.No story better encapsulates this disaster of trust than what we saw in Japan in the aftermath of an earthquake and nuclear disaster in Fukushima 18 months ago, because all traditional institutions failed at once.First, the owners of the nuclear reactor, TEPCO and the Japanese Government, assured local residents that all was well despite the release of radioactivity. Then reports began to surface in social media, calling into question the safety of the area. One person truth squads such as Man from Chernobyl emerged as the most credible among media sources based on their first-hand testimony, because mainstream reporters didn’t go close enough to the site. Global media, including social media, accused the government of a cover-up. Finally, late last year, Japan’s official agencies acknowledged that damage at the reactor was much worse than first reported and that there was a long-term health risk.The result?Japan, in one year, fell from a very high ranking to the second-lowest ranked country in trust in the world in our Trust Barometer, to a position ahead only of Russia. Trust in Japan is broken.Why is this a trend that gives us an opportunity to be more strategic than before? Because companies, and governments in many (but not all) countries, are working in an unprecedented era of distrust of their competence, their ethics and their intentions.
At a very personal level I think this is symbolized by our new relationships with our GP. In the past, the GP would be a revered individual. Our parents probably went to his (usually a ‘he’) surgery and sat mute whilst he dispensed his wisdom. Nowadays we go into a ‘meeting’ clutching fistfuls of print outs diagnosing our own ailment and another fistful where we already have views on what treatment or drugs should be prescribed. And of course, it is not that we really think we are better qualified than the doctor, though Google can actually make that happen occasionally, it is just that we have instant access to as much information and patient feedback as we can read on any ailment, and we want a proper conversation between two partners on our own health. We respect the doctor but we no longer revere him and we will question him, because we can now.In our Trust Barometer we see all over the world that people trust ‘people like yourself’ or an employee 3 times as much as they do a government official or a CEO. Facebook claims that someone is now three times more likely to buy a product if it is recommended by a friend. The new arbiters of influence are empowered consumers, employees, NGOs, technical experts and social activists. That’s not to say that the old elites are totally ignored or without trust entirely, it is just that they are now just part of the puzzle and, like our dear doctor, have lost the position of unquestioned reverence they once held.This by the way is not just a western phenomenon. In China, Weibo—the microblogging platform—has become the de facto opposition to state controlled media. Case in point: within five days of the high-speed train collision in Wenzhou in 2011, more than 26 million messages populated Weibo demanding investigations and apologies… government officials fruitlessly tried to manage perceptions and silence the story that did not appear initially in mainstream media. Within days, mainstream media was forced to cover the incident fully, apologies were issued and change promised. And symbolically, Premier Wen Jiabao went to the scene of the crash and bowed in honour of the dead and in apology to the relatives. What does this mean for our industry becoming more strategic? Governments and businesses can be materially affected or brought down by a host of new influencers and activists and whilst boards and CEOs were often of the old elites themselves and very comfortable working with them, these new powerbrokers require a new approach and one that only we as an industry are equipped to manage.
Which brings me neatly to the third change, the rise of Asia and the developing world. According to McKinsey, emerging markets will contribute 70% of the world’s GDP growth between now and 2020. Emerging economies will by 2025 account for over half of the global economy. Most of that will be Asia and most of that will be China by the way. And Asian and Chinese consumers and stakeholders are very different to those from developed economies and from the west. In China alone, 300 million have been lifted from poverty in one generation and yet if you visit Beijing or Shanghai you might be excused for thinking that first world status has been achieved and that our companies can operate and sell their products in the same way. They can’t, and yet the biggest brands in the world, which are still largely run from Europe or the US, seem to operate that way. How does this give us a chance to be a more strategic partner to our business? Because at our best, we are the people who most effectively, in any organization, interpret culture and community and can navigate beyond the narrow confines of legal market entry. We are the people in the front lines of helping global businesses localize and think with a developing economy or Asian mindset because if we are doing our jobs properly, we are the ones that are coming across it first and most often. If you have an international or global role and have not made efforts to understand the mindset of developing economies, you and your company will fail as future business success of any enterprise of scale is more and more predetermined by success in these markets. Two of my examples will speak to this later.
More people get news from digital or social sources than radio or newspaper, with only TV ahead.There are for the first time more digital subscribers to the Financial Times than print.The Huffington Post—a “born digital” medium—has more page views per month than the sum of The New York Times, The Washington Post and The LA Times.The UK’s Daily Mail and Guardian have more readers for their online versions outside the UK than inside… that’s an indication of how diverse and global our sources have become.Here in NZ the Herald is looking at phasing in paywall for non-print version subscribers from 2014.Today… instead of subscribing or searching, people get much of their news from their friends on Facebook or Twitter because it’s getting recommended or shared—a dramatic evolution. On average in Asia Pacific, 41% of all tweets (or equivalent like Weibo in China) link to content and most of that content is from traditional news sources. At the same time, news editors are following what’s trending on Twitter to tweak their headlines or rearrange what’s on the landing page. So even if you’re not on Twitter or Facebook, social media is influencing the stories that you’re seeing.And along with this paradigm shift, the nature of news consumption is changing. Rather than the old model of two servings of news a day—morning, and evening—people are grazing and snacking throughout the day… as they hopscotch from TV to tablet to laptop to smartphone – news as and when you want it.Instead of 35 minutes with a print paper… it’s now eight minutes with the digital edition… supplemented with news and information from seven daily sources. A person spends under 10 seconds on a landing page before deciding to stay or go.In many markets now, mobile has become the primary channel through which news and content is consumed and there is little chance of people reverting to PCs let alone newspapers or TVs. There is a generation growing up that will always look to their smartphone as their window on the world and the key to their relationship with family and friends as well as to issues and organisations that are important to them.Your companies entire reputation could soon need to be optimized for mobile and that by the way means pictures and video as much, and soon more, than text. According to Cisco, by 2011, video comprised the majority of consumer Internet traffic for the first time, making up 53% of all uploads and downloads. By 2015, video traffic will more than quadruple, and the internet will be 2/3rds video.Right now images give you an 84% better click through rate than text. Video boosts your contents’ chance of being selected by Google by 60%. So the logical rational who, what, where, why, when textual based way of storytelling that many of us grew up on is fast becoming, if not redundant, then a sideshow. Why do these changes matter to business generally? This is the traditional job we have always done. This is the box jealous colleagues in marketing will sometimes want to put us in.The answer is that the power and the speed of the good and bad that this new media eco system can do to companies and organizations is of a totally different scale to the days of, say, Ross Pownall and the pickle crisis I mentioned at the outset. More people spend more time, consuming more types of content from more sources than ever before. And it affects beliefs and behaviours that can commercially significant for our businesses. Even our old beat is more important than it once was.
Embrace your inner geek, or if there is not one, then find one, because as what we do has gone more and more online, then our ability, for the first time in our industry’s history, to be able to use data to monitor output, reaction to that output and crucially to gain insights upon is what communication, brand and yes, even business strategy can be based.Here is an example of a client dashboard and something called Tweetflow.
There are others out there and I am sure many of you are using them, but in the boardrooms and CMO offices around the world there is little excuse for us now not going into meetings looking much more like data-driven decision makers rather than just inspirational storytellers.Businesses at the highest level tend towards the rational and the data driven. There is no reason these days that we cannot play that way as well as supply chain or finance.
Partly driven by the new distrust of established authority and the democratization of influence, a generation of people are growing up who will simply not believe anything they are told the first time… unless that person is a friend. 64% of people need to see or hear something three to five times before they believe it. Saying is no longer enough. You have to do and be seen to do and then say.
And finally, everything is connected now. Employees blog about their employers, customers tweet about their experiences in real time about your product and this is read by an analyst assessing your stock. This makes our life more complicated of course, but it also means that PR needs to have a view on everything because it is just safer to assume that everything will be public or could be public. And given that, we need to be ensuring that our organisations and brands are doing what is right as well as what will be seen to be right in the short term. This is a big point and I do not underestimate how difficult it can be in some companies. Our remit in this new and totally interconnected world has become much wider and much more profound.
And finally, though this is very hard to prove causally, there is enough evidence now that if an organization loses trust in today’s environment it is very quickly punished. Happily the opposite is also true. This data is also from our trust study and even if you think only half of this level of response is true, then the economic and reputation differences between companies that have trust versus those that don’t are stark. Our function needs to be present and heard at the very highest level.
Which brings me on to this guy. Anyone recognize him? Here is what he said. He is Edward Bernays and to many he is the father of Public Relations. I think he is a bit scary.And he is well outdated, let alone the ethical issues I think he raises in any age. And yet there is still a heritage in our industry based on this sort of, ‘you can fool most of the people most of the time’ thinking and our belief at Edelman is that, more than ever, that is simply not true. It was called by some ‘perception management’, the idea that you only have to change what you say. Not only is that wrong, if that is what we restrict our role to, we of course remain a non-strategic function, putting the best face on what the company has already decided to do.We should now be advising on change and strategic direction, informed by research and in partnership with appropriate stakeholders and changing the ‘do’ as well as the ‘say’.
And that is why we are suggesting a ‘do’ based approach at Edelman which suggests five behaviours in an approach we call Public Engagement.These are: Be action-oriented > Sometimes your business has to change and sometimes it has to act. It is no longer enough just to ‘say’ or explain or advocate. Be values-led > Compliance is no longer enough. Make integrity a business value and help your organisation drive success through purpose as well as profit. Be open > Help your organisation act transparently about the both the“how” as well as the “what ” of its operations.Be multi-directional > Embrace both the established elites as well as the new influencers of employees, customers, NGOs and passionate advocatesto ensure both engagement is both vertical and horizontal. Be social > Listen and participate in the always-on conversation; create and co-create likeable, shareable and searchable content and behave in real time
In our methodology we map these behaviours to four types of outcomes that we have discovered fit most business situations and which allows us to better centre these behaviours in the business plan and in operational processes. Data in real time hugely helps this.Four outcomes of public engagement:Increased Trust > Closing the gap between stakeholder/consumer expectation and company/brand performance earns the license to lead not just to operate.Broader/Deeper Communities > Growing and deepening relationships with key stakeholders and their influencers.Behavior Change > Moving from delivering messages to creating meaningful conversations and dialogue that create tangible outcome for business or the brand.Commercial Success > Delivering measurable financial benefit (increased revenue, increased profit, decreased costs, better products, better service and improved company value).So does this stuff work? Can we operate at a strategic business level by advising on behaviours as well as communications? The answer is an emphatic ‘yes’ and of course the best of us have always done that, at times, but these changes I have outlined mean our businesses and our clients need us more than ever to step up and consistently deliver at this level.
Mars Wrigley, one of our clients, in China will in the next couple of years go from being a US$2.6 billion to a US$5.4 billion business. That makes China by far their second biggest market after the US. And yet, as Mars has done for many years in many markets, they kept a low profile. But in a country where government has no democratic safety valve and so where public ‘harmony’ is so important to them and yet where the food supply chain had consistently been compromised over the years (just ask Fontera), this posed significant risk.And so their PA team took the lead and decided the best strategy was to become China’s best partner for food safety and food security. And so the firm diverted a multi-million dollar investment into a new Food Safety Centre that was destined for the US or Switzerland, where traditionally these entities reside, to Beijing. They did it hand in glove with the government and initial research projects will look at China specific issues though this is a global centre of excellence. They are partnering with local universities and with local scientists and NGOs. They are changing their supply chain policies based on this and they are now absolutely part of the solution and contributing to China’s development and are seen that way. At the recent Boao Forum they got as much face time as John Key.They changed their behavior and the PA and PR teams were drivers of that. The business value of this is immense.
Another China example.Starbucks, another one of our clients, had successfully opened and operated their coffee shops for many years and were growing well. But like Mars, as the importance of the market grew so did their exposure. The PR team drove a process that looked at both localizing their offer a little and playing a significant social role. In this case that was for China’s enormous but impoverished rural sector. The company identified an area of Yunnan province where conditions for coffee growing existed and then trained farmers on what to them was a totally new crop. They invested in a cooperative infrastructure and provided some funding and expertise and now they grow coffee beans successfully, which they sell in store and market aggressively as locally grown and produced. All this was led by the PR teams, changing the company’s very sourcing policies and thereby bringing to market a great new local product and proving to government that the company was committed and contributing to national development. PR thinking fundamentally changing product, and through its help, put government and community relationships on a sound long-term footing.
But what about marketing and the role we play in that? I have long contended that the future of advertising is PR thinking. Look at any new-age ad firm and their web site reads like the last thing they do is buy space. They too are all about engage and dialogue. That’s great, because we have already won the intellectual battle. What’s not so great for us, is that the ad agencies are consistently better than many of us at actually doing these things.You will all I am sure be aware of Queensland Tourism’s campaign a couple of years ago. If so you will remember that the gag was they would advertise for someone to be the caretaker of Hamilton Island at an annual salary of $150k. Sure there was a bought media element to it. Here’s one. They also put lots of little help wanted ads out there and then let PR take over, and it did. A world-wide phenomenon. A campaign CMOs the world over point to and say ‘give me one of those’. Our problem in the marketing world is that mostly it is the ad agency groups and the marketing executives that are delivering on this, not the PR agencies and the communications folk.
So to conclude, PR is now absolutely a strategic management discipline. Within communications it is absolutely our time to lead. My question is, are our businesses, bosses and clients ready for that?And are we qualified for the challenge? Thank you.