Can Apple Turn its Privacy-Related Reputation Risk Gamble into Stakeholder Value?

It was interesting to see in recent headlines how the U.S. Government is spinning the Apple encryption case as a case of marketing (see: http://www.wsj.com/articles/justice-department-files-new-brief-to-force-apple-to-help-open-san-bernardino-shooters-phone-1455910046) which is more or less what I said to the Wall Street Journal in this article (http://on.wsj.com/1WvUhgN).

In essence what both the U.S. Government and I are contending (for different reasons, I’m sure) is that Apple realizes that its future business success is built on being a long term successful and acceptable global brand whose growth depends most heavily on being viewed by global consumers as a security-neutral privacy-sensitive technology firm rather than one that “obeys” the US government, a government that has its own reputational baggage (especially with global audiences) harkening back to the Ed Snowden NSA revelations.

Apple’s stance is a reputation risk gamble for sure, especially given the highly unpredictable nature of this story and the impact of the crazy news cycle we are living through in this presidential election year in the US. Whether it has any kind of impact, candidate Trump has already jumped into the fray to advocate a “boycott” of Apple.

However, taking a strictly dispassionate business-centric view of this issue, it would seem to me that Apple (for better or for worse) has made the judgment call, based on what appears to be sound stakeholder analysis (at least for now), that it will cater to its most important and/or largest stakeholder group: its global customer. Apple is most definitely playing a high stakes reputation risk game in doing so and may be blemished or hurt more substantially by this decision. But for now, from a strictly reputation risk and stakeholder analysis standpoint, Apple seems to have made the most rational business decision.

The real question is: will this rational business decision actually be good for business? There are several criteria the astute observer should bear in mind over the coming weeks and months (and maybe even years) in which this case may unfold, including the following:

  • Technology Fix. Will an intervening “technology fix” save Apple and other technology companies in a similar bind concerning the encryption battle lines that are being drawn between Silicon Valley and the U.S. Government?
  • US Customer Discontent. Will there be a greater negative reaction from traditional Apple customers (especially in the U.S.) who may feel that Apple’s stance is not acceptable to them from a security standpoint? This issue could become galvanized if one or more terrorist incidents occur in the U.S. leading the U.S. government to up its encryption cooperation demands
  • Privacy Deterioration. Is there a trend taking place in both the US and in the EU (in the face of ongoing terror threats and a marked increase in security measures in the EU) that will slowly but surely lessen the importance of privacy to citizens and consumers in favor of their greater acknowledgment of the need for security?
  • Judicial Determination. Will the US courts side with Apple’s stance on this issue granting them protection from US government demands based on a variety of grounds including constitutional one’s?

These and other unpredictable factors are likely to color the evolution of this case and the “reputation risk Russian roulette” that Apple appears to be engaging in at this time. The jury is out as to whether Apple will transform this particular privacy-related reputation risk into sustainable value creation by retaining its global consumer stakeholder base or whether they have already shot themselves from a brand and reputation standpoint. One thing is clear, however, the battle lines have been very clearly drawn for now.

For more resources on this and additional topics, visit our Thought Leadership page here: http://bit.ly/1LYqQjM

For my latest two pieces see:

“Volkswagen: The Perfect Storm” for Ethical Boardroom Magazine January 2016 available for download here: http://bit.ly/1SLbN28

“Effective Risk Governance: The Top Five Strategic Risks” for the NACD Directorship Magazine January/February 2016 issue available for download here: http://bit.ly/1SLbQer

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