The Butterfly Effect

July 30, 2006

The Butterfly Effect

I was reminded of the butterfly effect last week as I was preparing for a presentation on corporate reputation trends. The first definition in wikipedia says that “small variations of the initial condition of a dynamical system may produce large variations in the long-term behavior of the system.” This is a fairly technical explanation related to chaos theory.

Wikipedia’s second description was closer to what I was thinking about with respect to reputation matters today. “The phrase refers to the idea that a butterfly’s wings might create tiny changes in the atmosphere that ultimately cause a tornado to appear. The flapping wing represents a small change in the initial condition of the system, which causes a chain of events leading to large-scale phenomena.” That is more like it. When I first heard the term, it was something like this, ” Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?”

It is easy to see how the butterfly effect applies to reputation today. A reputation transgression that begins as a flap in Silicon Valley (stock options) sets off a tornado in Washington DC with the SEC and Justice Department? The arrest of LiveDoor’s CEO in Tokyo sets off a hail storm in the financial markets? A fraud in a U.S. foodservice division leads to a new CEO and the label of “Europe’s Enron” or “tsunami” for Global Fortune 500 company Royal Ahold?

Collateral reputation damage is more common today than it was 10 years ago. A product recall in the pharmaceutical industry impacts all of its peers worldwide. The rise in oil prices influences perceptions of all oil majors. The backdating of stock options in Silicon Valley rubs off on all technology firms. It is now a fact of life in reputation terrain.

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Leslie Gaines-Ross
Leslie Gaines-Ross

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of corporate and CEO reputations.


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