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Outsourcing Your Image
March 26th, 2010
Even as companies go through great lengths to protect their image and brand, they may not realize that their partners can be an asset – or a liability. Toyota's recent troubles illustrate this point well.
The safety and image problems that are plaguing Toyota have exposed a reality of the modern and global business world - when companies chose to outsource a portion of their product and/or services they are placing their image, their brand and their reputation into the hands of another organization. Making the right choice can enhance a company’s reputation and increase the value of its brand. Making the wrong choice can have a devastating impact.
On the positive side, there are also examples when companies provide such superior products and services that by containing them they actually enhances the image and value of a product or service, such as ‘Intel Inside’ on a computer or web site searches that are powered by Google.
Far more often, the name of the outsourcer is unknown and the benefit – or the liability – remains with the primary company or organization. I am fairly certain that my internet service provider has outsourced its customer service department. But the interaction that I have with them directly impacts how I feel about my provider, and not that unknown company. When my dishwasher recently needed to be replaced, I didn’t care – or seek to find out – who made the specific component part that stopped working. I blamed the company that’s name was on the front of the unit. And because that unit failed to meet my expectations, I replaced it with another brand. The ironic thing is that, upon reflection, it is likely that the component that failed in the first unit is likely to have been sourced from the same supplier by the second company.
It goes beyond merely providing quality products and service however. Environmental and social concerns also impact reputation and brand value. It is not a matter or off loading liability – thanks to the interconnected global world that is increasingly difficult. Because they will be viewed as accountable – they are accountable. Therefore, companies must be sure to seek partners who share their commitment for reducing their environmental footprint, preserving and protecting human rights and a host of other issues. Examples include apparel companies that have been caught off guard when it has been revealed that their suppliers are using child labor to produce their clothing.
Rather than seeing this as a threat, companies that provide outsourcing and supplier services should recognize that shared values and commitments is an increasingly important part of the value proposition that they offer their clients and can be a key differentiator.
It is not enough, however to share values. One must, in the great phrase of President Reagan ‘trust, but verify.’ Because the company purchasing the outsourcing services or products assumes the majority of the reputational risk, it is their responsibility from both a moral as well as a business standpoint to ascertain that their suppliers are living up to their articulated values. Perhaps the best known example is Nike, which has taken a leadership position in this area by not only requiring a supplier code of conduct but by conducting audits to ensure compliance.
The supplier also stands to gain – or to lose. Suppliers should welcome this level of validation because having those values in place is part of the service that they provide clients. Suppliers that embrace this model benefit by becoming the preferred provider. Firestone was proud to provide Ford with tires for its top selling Explorer SUV, until a rash of roll over incidents resulted in each blaming the other for the problem. Ultimately, perhaps because Firestone was not only a supplier but also an established consumer brand in its own right, Ford distanced itself from both their supplier and the product. The result was a messy separation and severe damaging of the Firestone brand. In the case of Toyota, the supplier remains unknown and the reputational damage has remained with the purchasing organization, which is why Toyota sales are down and their executives are busy defending their company to legislators and the public.
The bottom line is to take heed and remember that while intentions matter, actions count. And in this new global and interconnected world, this includes actions undertaken on your behalf.