Consumers are safer with brands than governments
In this guest posting, Kogan’s David Shafer argues that Qantas’ handling of its air emergencies demonstrates the importance of brand value in ensuring consumer safety
Anybody who is interested in the power of a brand should take note of what Qantas has done this past few days.
On 4 November, immediately after the troubled A380 aircraft successfully landed, Qantas announced that, “in accordance with its commitment to the highest safety standards, it has suspended scheduled A380 takeoffs”. CEO Alan Joyce suspended the flights until such time as Qantas are “completely confident that Qantas safety requirements have been met”, and underscored, “We’re not going to take any risks with passenger safety.”
This is despite the immediate financial loss that Qantas suffered while it found stranded passengers hotel accommodation, and organised replacement aircraft.
Those who believe that corporations can’t be trusted must be at least a little puzzled by Qantas. Isn’t the selfishness of the free market supposed to cause corporations to cut costs, and jeopardise our safety? Don’t we need Government regulators and watchdogs to keep the bastards honest?
I don’t think so.
Adam Smith famously wrote that, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.”
Similarly, a company like Qantas has every incentive – every selfish incentive – to ensure the safety and security of their passengers. A company’s most valuable asset is its reputation. This is particularly the case in a market where consumers are highly attuned to safety and security matters.
Like many other companies, Qantas has invested millions and worked for years, or decades, to earn a strong reputation. The hint of any tarnish to the brand could be fatal to the future of the business. Competitors are always looming to exploit this type of vulnerability, so Qantas simply cannot afford to risk its reputation by reducing its safety standards to save costs in the short term. Qantas’ desire for profit – long term profit – provides the greatest motivation to be meticulous in protecting its reputation for safety.
What, by contrast, motivates a Government official or bureaucrat?
Compare Qantas’ response to its safety threats to the response of the Commonwealth Government to the safety concerns raised by the Pink Batt insulation scheme.
Rather than immediately responding to safety concerns by halting the program, the then Environment Minister reportedly ignored repeated expert warnings that the scheme was flawed at every stage of the unfolding disaster. As we now know, this willful blindness of our trusted politicians ultimately resulted in four deaths. Of course, the Government has no profit motive and no investment to protect – they are supposed to act for the ‘common good’, but they conveniently failed to act when lives were at risk.
The key difference between a businessman and a bureaucrat is that when a businessman makes a mistake, he is the one who suffers the loss, whereas when a bureaucrat makes a mistake, it is the public that suffers the consequences.
Unlike governments, private companies cannot force you to buy their products – you are free to seek a safer, more reliable, alternative. While politicians come and go, the only way for a company to achieve success over the long term is through honesty and integrity.
Ignoring danger signs, deceiving customers or taking short cuts to make a quick buck simply is not a winning business strategy. Qantas has set a fine example of what it takes to maintain a quality brand.
- David Shafer is General Manager of Kogan which designs, manufactures and sells consumer electronics and home appliances
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Interesting insight.
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This is a good example of a company behaving well, but a few factors come into play here, not least of which is what Qantas actually sells. Qantas and the public have matching goals, but this is not always the case.
In other words, don’t expect the best public interest from a company that makes weapons (no peace rally sponsorship there), or a push to cure a disease from companies that make medicines for symptom management.
(Side note: is Kogan ever gonna take another swing at an Android phone?)
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Sorry, but I don’t buy this faux-Libertarian, US tea party type nonsense.
History’s littered with corporations prepared to trash their brand because their management thought they could get away with cutting corners. Google “Dell Hell”, “Ford Pinto gas tanks” or “Firestone tire recall” (pardon the US spelling) for starters.
Qantas’ and Alan Joye’s reaction to the airline’s various problems in the last few weeks has been exemplary however as we saw in the 2001 grounding of Ansett, not every airline executive puts safety as their first priority.
The reality in our modern technological society is we do not have the ability to judge whether an aircraft engine, car fuel tank or laptop battery is going to explode at any given time.
If we leave it to managers who are concerned about their brand, it means the market signals become our families dying in flaming tragedies. “Sure I’ve lost my family but at least now I know Mumbrella Airlines are dodgy and I won’t fly them again”.
On the topic of Mumbrella, I’m wondering why Dr Mumbo would let his brand be hijacked with half arsed, poorly thought out political discussions. It might get eyeballs and the odd mug like me sucked into commenting, but it isn’t why most of us visit the site.
For Kogan, I think David has raised a very high bar for the company. When a recall of a Kogan product happens, and it will given even the best designed and manufactured products have the odd hiccup, this article is going to be remembered.
We should keep in mind that many US business people spouting selective quotes of Adam Smith pre- GFC are the same ones who the same ones who rushed into the arms of government support the moment their risky bets turned against them.
Ayn Rand must be spinning in her grave. At least this article shows there’s still some mileage in her old rope down under.
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Fantastic article. There should be policies implemented to make governments more accountable, especially when it comes to people’s life. The again, only government can implement such policies and I don’t like the chances of that…
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erm, no …
Companies act out of selfish incentives, as you said. In Qantas’ case this coincided with their customers’ interest in their own safety.
But that’s not always the case. For decades, tobacco companies felt their selfish interests lay in obfuscating and denying medical evidence about the carcinogenic properties of cigarette smoking, because really, what else are they going to do? It’s hard to think of how a company, whose sole interest is in manufacturing recreational products that cause cancer is ever going to align with the self-interest of consumers who want to stay alive.
As for governments, they can get pilloried in the pages of the Australian (where you seem to have borrowed much of your thinking …) and then voted out. That’s a pretty strong incentive to act, and be seen to be acting in their constituency’s interest.
Last word on the pink batt *fiasco* goes to Crikey blogger Pollytics: “we thought that it might be worthwhile for someone to take their underpants off their head and have a squiz at what the data actually said. What we found was that under every possible scenario, the government insulation program … actually reduced the rate of fires and likely reduced the rate in a quite substantial manner. Even if we take the best absolute possible estimates of what went on before the program … the program is still 7 times safer in terms of fire incidents than what occurred before the program.”
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@ Dominic
“There should be policies implemented to make governments more accountable”
What, like an election of some kind?
I mean, I don’t even, jeesh …
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@Werewolf Bar Mitzvah
You said all I wanted to say in more eloquent and better-supported arguments.
Shafer’s thesis rests on the false assertion that the insulation program was a)fundamentally flawed, dangerous (wrong) and b) evaluated fairly by media (most notably The Australian and 2GB). His assumptions re. what that program represented undermine the entire argument.
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I think the point of some of the comments here is that Qantas does not represent the broader corporate sector.
We should remember that when Qantas grounded its A380s, Lufthansa and Singapore kept flying theirs. Same engines, same risk… different safety standards?
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Hilarious! On the insulation programme, Mr Shafer says “willful [sic] blindness of our trusted politicians ultimately resulted in four deaths”. Um, no. Dodgy businessmen wanting to cash in on a windfall government grant, poor workplace safety measures and inadequate training — all the employers’ responsibly — resulted in deaths.
While I — and I daresay others — would find the image a turn-on, I don’t think it’s Peter Garrett’s job to root around on hands and knees in a hot, dusty ceiling space searching for safety risks.
In business terms, I think Mr Shafer’s strategy is called “externalising the blame”. When things go right, it’s to the credit of the “brand”. When things go wrong, it’s the government.
Still, those employers have tarnished their brand, so we won’t go to them ever again, eh? What were those brands again, so we can avoid them? Does anyone remember? No? Well, “protecting the brand” is obviously a bloody powerful force for good then, eh? And what would stop dodgy businesspeople doing a phoenix company, and being just as shonky under another brand? Nothing.
It’s tragic for those involved, of course. But given the fact that the building industry is one of the most dangerous workplaces there is, statistically those four deaths are not particularly out of the ordinary. That needs to be fixed.
By Mr Shafer’s logic, once the building industry was deregulated workplace deaths would have declined, because “brands” care and bureaucrats don’t. A pity for his theory that the exact opposite happened.
As for the fires that resulted from the home insulation programme, a proper analysis — rather than talkback radio screeching — has revealed that the government insulation program … actually reduced the rate of fires and likely reduced the rate in a quite substantial manner.
Qantas’ safety record is wonderful, and their actions on this occasion seem to have been good. But surely “protecting the brand” isn’t the only factor here because “protecting the brand” is a factor common to all airlines on the planet. I wonder whether it might possibly also have something to do with Australia’s strong regulatory framework, a free and open investigative media, a powerful air safety investigation body and a competent criminal justice system that’d come down on transgressors like a ton of bricks?
What’s most disturbing of all here is the implication that Qantas’ motive to “protect the brand” is what saved people — as opposed to the human motive to, you know, not let people die. What that seems to say about Mr Shafer’s’s worldview disgusts me.
Mind you, it’s only marginally more disgusting that quoting Adam Smith out of context.
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This theory is borne out in how we’ve dealt with climate change thus far, as an example. Many corporations are keen to act because they know its in the interests of their long-term bottomline, but governments have been paralysed because of political risk.
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Point taken, but clearly not right and quite disturbing article actually.
Seems that your causing trouble, and it’s just utterly wrong as it’s been pointed out about other airlines flying the A380 planes.
You might need to scrap or delete this article as it might get you into future trouble, just a prewarning I guess. 🙂
I totally agree with comment 3. By Paul Wallbank
17 Nov 10 – 10:34 am
good luck with future comments!
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This is such a simplistic post. A waste of space to be honest.
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Based on this post …
I will never buy a product from Kogan …
Someone once said …
“…private companies cannot force you to buy their products…” …
This article is a clear representation of the Kogan brand … and not a good one.
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Just realised:
The article is similar to a Today Tonight report.
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brilliant post Stiggers
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One example should suffice to blow this nonsense augment away. James Hardy were so concerned for their brand and public safety they kept their dirty little asbestos problems a secret for decades, with devastating results. Of course we could list many more…
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Very interesting debate. Two opposing points of view. everyone trying to prove they are right and the others are wrong. Why cant we just encourage more of the positive behavior such as this airline example and discourage the negativity of the tobacco companies? at lest the airline companies protects its passengers from the tobacco industry by prohibiting smoking on flights 😉
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really good article, lots of new thoughts brought up – especially like the beginning. That is interesting how they suspended all their flights, never thought much about it but you’ve put it into perspective well.
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Tim it’s surprising that this Young Lib propaganda met your editorial standard – it’s nothing more than a thinly veiled, tortured attempt to have a crack at the govt. When i last looked Mumbrella wasn’t a political blog!
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It’s not just a thinly veiled attempt to have a crack at the government, it’s part of trying to get people to accept Ayn Rand’s libertarian worldview. Given that the founder of the company is rather fond of her ideas, it makes me wonder if their whole company is as far right wing and nihilistic.
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The Qantas CEO said the engine problems were not a maintenance issue back when they first happened before they had barely had a chance to examine them.
Clearly he was more interested in absolving Qantas at that time.
And pls – corporations being better for people than govts?
I am sure good corporate citizens like James Hardie would agree – shame about those it killed tho
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Brands work on the principle that it is not a public relations disaster until the public know about it. Plus brand reputation is not the ultimate corporate goal, profitability is.
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The lesson learned: beware idealistic young men like Shafer who get confused between models of reality and reality itself. Based on this article Kogan made a poor employment decision.
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