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The firm you save may be your own, says Professor Daniel Diermeier as ‘Nota Bene’ lecture shows how to prevent ‘intelligence failure’

By Aubrey Henretty

April 20, 2007 - “Do you know this person, here?” asked Professor Daniel Diermeier, aiming a laser pointer at a smiling face on the cover of an old issue of Fortune magazine. “This is Lee Scott, the CEO of Wal-Mart.”

The magazine cover was from 2004, said Diermeier, when Wal-Mart was Fortune’s No. 1 Most Admired Company of the year. He clicked the PowerPoint presentation forward and the image was joined by another — a crisply dressed, six-armed monster whose head was an angry-looking variation on the retail giant’s trademark yellow smiley face.

“This is from about six months later,” he said.

Diermeier, The Kellogg School’s IBM Distinguished Professor of Regulation and Competitive Practice, spoke to a capacity student audience in the Donald P. Jacobs Center on April 18 as part of the Kellogg School’s Nota Bene lecture series. A spring tradition at Kellogg, Nota Bene offers graduating students a chance to attend a lecture by a professor whose classes they could not quite squeeze into their schedules during their Kellogg MBA experience.

Fifteen minutes before the session was scheduled to begin, more than half of the classroom was filled. Though some students had taken classes with Diermeier previously, they were enthusiastic about attending the special lecture, titled, “Reputation Management: Beyond the Obvious.”

“[Diermeier] always has really good real-world stories to highlight in his presentations, said Colby McGavin ’07, who stayed through the question-and-answer session that followed the lecture. Classmate Bryan Campbell ’07 added, “He’s the thought leader in this whole space.”

“PR usually happens when everything else has failed,” said Diermeier, noting that public relations emergencies can be caused by failures of just about anything from a rogue supplier to a crooked accountant, but that all are really failures of intelligence.

To illustrate the problem, Diermeier cited the infamous Feb. 12, 2002, defense briefing by former U.S. Secretary of Defense Donald Rumsfeld in which the secretary described the “known knowns,” “known unknowns” and “unknown unknowns” of intelligence gathering. It’s easy to contain a problem one knows about (a “known known”), Diermeier said, and difficult but possible to investigate potential problems of which one is aware (“known unknowns”). The deadliest problems, he added, are the ones that seem to come out of nowhere but that are perfectly apparent in retrospect (“unknown unknowns”).

“This is true in many different business areas,” said Diermeier, “but it is especially true in the reputational area.” The only way to combat unknown unknowns is to develop an early warning system by improving intelligence, according to the Kellogg professor.

“How on earth do you find something you’re not aware of? Not by using Google,” Diermeier quipped. “Go to Google, type in ‘What is the next big issue that’s going to blow up my company that I’m not aware of?’ and hit return. I’ll be curious to see what comes up.”