Client needs, priorities, and expectations — the issues that are most important to them — have a natural tendency to change. The overwhelming problem for incumbent players like Goldman Sachs is that reputation ‘migrates’ from outmoded business models, representing the ‘old ways of doing business’, to newer models that better align with and address clients’ most pressing concerns. Incumbent players usually find themselves trapped in rigid business models. Truths become traps — success is yesterday’s truth.
Corporate reputation by itself is a measure of the strength of a business model to create and capture value. Reputation gradually flows into business models that respond to evolving client needs, priorities, and expectations, often overlooked (or simply neglected) by established players. And, although the ‘reputation migration process’ may start slowly, it gains momentum as a business model edges closer to obsolescence. Corporate reputation migration as a business concept is the process of transferring an organization’s immaterial capital (‘reputation equity’) to new — often disruptive — players.
Since the 2008/09 global financial crisis, the rate of ‘reputation migration’ has increased in the banking industry. The game has changed. The reputation once held by the erstwhile ‘masters of the universe’ now shifts towards newcomers like boutique (investment and other) banks and entities like PE firms and hedge funds.
Competing on reputation is a dynamic game, much like Go. To excel in Go, as in banking, one must grasp how specific positions and moves on the board lead to particular outcomes and subsequent countermoves.
Goldman Sachs must focus on understanding where the value in the banking industry resides today and where it will move tomorrow. Managing the ‘reputation follows value’ paradigm superbly is key. Better business models reallocate corporate reputations — it is a fundamental law. Changing client needs, priorities, and expectations, and how they interact with newcomers’ offerings (via new business models), are what trigger the migration of corporate reputations.
Consequently, Goldman Sachs must develop a dynamic, in-depth understanding of the needs, priorities, and expectations of both current and potential clients. Merely understanding their concerns isn’t enough, according to a large dataset of over 4,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies that participated in a multi-year study on the reputations of banks, providing commercial, corporate, and investment banking products and services in Europe.
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Goldman Sachs will not win the next competitive battle the same way it won the last one.