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1. Steve Jobs. His reputation, his brand consistency, his black shirt.

2. Liver transplant and back. Seriously. He takes medical leave and still comes out with the iPad.

3. It’s gorgeous and thin, like Steve.

4. There is nothing like it. yet……..I’m sure that HP and Sony and all the rest are R & D’ing now. Ripping off and duplicating.

5. It’s really not that expensive.

Nice try haters. Apple wins again.

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I truly believe that corporations don’t have values, people do.

I developed this tool I call the “ripple effect”  to use in my consulting and strategic planning facilitation to a) show the board and CEO that what they really value is not necessarily what is framed on the board room wall and b) to help the management team realize they have very little control over their  brand or reputation.

It’s so simple in theory, but hard in practice. As luck would have it, our economy experienced a ripple effect akin to a tsunami when bad decisions, investments and values caught up with the banking system.

It has provided me with a wonderful illustration of the ripple effect. I give you the story of Washington Mutual or WaMu.

It’s September 25, 1889. The great fire of Seattle had destroyed 120 acres of the central business district. Washington Mutual begins to literally rebuild the city. They made their first home mortgage loan 5 months later. For the next 80 years, their focus was on the American Dream….owing a home, not having a mortgage. There’s a difference, in values.

The core of the ripple effect – values. So devoted were they to this value that in the 90’s they even stopped offering auto loans.

When leaders change, so do the values. In 2003 Chairman and CEO Kerry Killinger pledged to build WaMu into the “WalMart of Banking,” which would cater to the lower and middle class consumers that other banks deemed too risky. Big shift in values. The ripple effect begins.

The appetite for profits was huge and the housing market was feeding that hunger.

The ripple begins with rewards. Rewarded behavior is repeated. In the book Punished by Rewards, Janet Spence offers this observation:

[Rewards] have effects that interfere with performance in ways that we are only beginning to understand.

There is a time to admire the grace and persuasive power of an influential idea, and there is a time to fear its hold over us. The time to worry is when the idea is so widely shared that we no longer even notice it, when it is so deeply rooted that it feels to us like plain common sense. At the point when objections are not answered anymore because they are no longer even raised, we are not in control; we do not have the idea; it has us.

Values shifted. Measures and rewards shifted. WaMu began pressing sales agents to approve loans while placing less emphasis on borrowers income and assets. They set up a system that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers. Ripple.

On December 27, 2008, the New York Times featured an interview with a former WaMu mortgage processing center supervisor. The article stated:

“John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and school teachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu was all about saying yes.”

The ads were everywhere as was the word-of-mouth. Customers marketed for WaMu. Think about it. You’re WaMu’s new target audience. Blue collar worker. Renter. Suddenly you’re in a beautiful home. You brag. The power of yes is real. Ripple.

Pressure to keep lending emanated from the top (the values center) where executives profited from the swift expansion. They acquired mortgage companies in California, Illinois, Texas, Florida and New York. Kllinger received compensation of $88 million between 2001 and 2007 (the culture ripple – reward). WaMu pressed sales agents to pump out loans while disregarding borrower’s incomes and assets (the action ripple). WaMu’s the Power of Yes ads and word-on-the-street fueled growth (the reputation ripple).

“We hope to do to this industry what Wal Mart did to theirs, Starbucks did to theirs and Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”

- Kerry K. Killinger, chief executive of Washington Mutual, 2003.

Well Kerry, you were right about one thing. In five years you would not be called a bank – you would be called the biggest bank failure in American history. Congratulations.

He began to lead with his greed instead of his head, or his cold, cold heart. He valued the bottom line more than people’s well being. He lost site of the American dream. He will be credited in history as a catalyst in this economic crisis.

WaMu’s story ended eerily on the same day it began – September 25, 2008.

As you finalize your 2010 budgets, please take a moment to see what you value. What is getting measure, managed and rewarded? What ripple effect could that have on your reputation?

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