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"Move fast and break things" - Reputational risks for innovators

Posted on 21 March 2024

Those who move first and take risks often attract scrutiny, scepticism and even hostility. Whether innovation comes through new industries and technologies or disruption of the traditional, fast change and new ideas can frighten those who misunderstand them, and can cause the media and competitors to look for opportunities to attack.

Entrepreneurial founders often deploy their powerful personalities to drive and achieve great success, taking risks that others avoid. Sometimes their less agreeable behaviour is tolerated only because of their position, or other more enviable attributes. Many founders joke that they started a business because they were unemployable, but if they fail to structure their teams and businesses in ways that invite challenge and honest feedback, they can open themselves up to reputational as well as commercial crisis.

Founders have sought our advice when their profile has made them a target for extortion by historic rivals and former lovers. Businesses regularly seek support in responding to negative comments online, or dealing with complaints by employees, which at their root emanate from what can (kindly) be described as growing pains – struggles to move from an informal, maverick mentality to a more professional environment. We recently helped one tech unicorn growing into new jurisdictions to reflect upon and reinstate its core cultural values, and to put in place comprehensive employee policies and protocols to support them, following a series of internal complaints which, if less unaddressed, would have spiralled into a fundamentally damaging episode.

The costs of growing fast

Fast-moving start-ups and scale-ups tend to prioritise growth – following Mark Zuckerberg's memorable motto of moving fast and breaking things – and embrace the 'breaking' as a necessary consequence of success. But our society and media are increasingly unforgiving and intolerant of failure.

As businesses grow in profile and profitability, a lack of focus on certain key issues can have catastrophic consequences. Businesses accused of ignoring societal hot topics – including sustainability, effective corporate governance and positive workplace culture – attract particular scrutiny. Accordingly, those who neglect to enact, for example, robust and effective HR policies and processes around anti-bullying, discrimination, relationships at work and whistleblowing, do so at their peril.

The wrath of rivals

Envy is a strong emotion, which can evoke the compulsion to destroy. Where a company emerges out of nowhere and suddenly pulls ahead of its rivals, it (to mix all the metaphors) makes waves, ruffles feathers, and attracts the green-eyed monsters.

Competitors who were previously collaborative in respect of industry-wide initiatives, may feel alienated and pull back. Certain sections of the media, keen for click-bait stories along tried and tested lines, will likely dig for dirt. And ex-employees or others who were in some way part of the journey may feel left behind, and lash out by going to the press with damaging allegations (both true and untrue) and private or confidential information.

We recently acted for a well-known entrepreneur whose ex-partner threatened to disclose deeply sensitive information, including about his mental health and addiction. Our robust intervention was effective to diffuse the situation and prevent public disclosure. Often, understanding the motivation behind such attacks can be key to planning to mitigate their impact.

Filling in the gaps

Whether it is a business that is first to market, or a new founder, those who hit the headlines when they were previously unknown can be a blank slate for the media and other commentators. Often, they will look for a backstory, and to build a narrative, perhaps talking to "friends", associates, employees and looking at the founders' output online. If a brand or individual goes on to have sudden influence, those early interviews and profiles can shape perceptions and misperceptions that are later hard to lose. Innovators are often portrayed, for example, as having unattractive or exaggerated characteristics: "aggressive", "single-minded", "reckless". This is particularly true for women and minority communities. Mischaracterisations ought to be addressed early, before they become ingrained.

Prepare for scrutiny

Entrepreneurs are often so embedded in their ideas, concepts and creations, that an attack on the organisation can feel – and be – extremely personal. They can find it difficult to put their emotions to one side, particularly when their and others' livelihoods are at stake and their conduct and integrity are being challenged. It is important, ahead of a crisis, to agree how decisions will be made, and who founders will consult with, to ensure they make rational choices.

Reputational crisis situations tend to emerge and escalate quickly, and organisations are judged not just on what caused the situation, but also on how they dealt with it. Those who fare best are generally those who have thought through in advance the likely avenues of potential challenge or attack, and instigated effective crisis response protocols, which include how they will investigate allegations discreetly and efficiently, and manage hostile enquiries.

Often profile comes before an emerging business is developed enough or feels financially ready to have a sophisticated communications function, dedicated HR and legal support. A Crisis Protocol might be identified as something that would be sensible to have "down the line", or "after the next funding round, when budgets feel less constrained". But when viewed as insurance against reputational ruin, or weighed against the significantly greater cost of responding to and recovering from a badly-handled crisis, the upfront cost is easier to justify. Such plans can – in fact, should – evolve over time. They do not need to be exhaustive or elaborate, but they do need to exist to be of any assistance when things go awry, when the media starts asking questions, and when people start losing their composure. 

The key to protecting reputation is preparation, to know your vulnerabilities and plan for scrutiny intelligently in advance. First movers that fail to address, early on, how others see them and what their "story" and profile is, including of their key individuals, risk having that story written by someone else. They also, if they fail to audit themselves honestly, risk being on the backfoot when the gaps in their policies and procedures, and the gap between what they say and do, are invariably exposed.

At Mishcon de Reya, our Reputation Protection and Crisis Management team are experts not just in crisis management, but proactive reputation protection - providing objective and comprehensive reputation audits to identify reputational risks in advance. Those who innovate in business, and move fast and break things, are wise to consider how fragile their egos and their reputations might actually be.

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