Find out how a livestream tarnished this custom PC maker’s reputation overnight!

Tuesday: Return Driven Strategy FROM THE DESK OF MILES EVERSON: Have you heard about Return Driven Strategy (RDS)? If you haven’t yet, it's a pyramid-shaped framework that has 11 tenets and 3 foundations. When properly integrated into your business strategy, these principles will help you achieve true wealth and value creation. For today’s case study, we’ll look at RDS’ 1st tenet: Ethically maximize wealth. Continue reading below to understand why it’s important for businesses or brands to prioritize ethics. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Find out how a livestream tarnished this custom PC maker’s reputation overnight! Are you familiar with Artesian Builds? For those of you who aren’t, the company was a system integrator that assembled personal computers (PCs) for gamers and streamers. In March 2022, Artesian Builds’ reputation tanked after it received widespread backlash from the gaming and Twitch communities. To understand what happened, let’s dive deeper into the company and its controversy. Artesian Builds made a name for itself for building PCs live on Twitch. The custom PC maker employed around 60 to 70 individuals while raking in USD 20 million in sales annually. One of the factors that enabled the system integrator to remain competitive was its strategy of operating a brand ambassador program that increased its brand exposure. Given these details, it seemed that the company was doing well in the custom PC building space. Unfortunately, all of the gains Artesian Builds made throughout the years of its operation was lost due to a single livestream. On March 1 2022, during the system integrator’s monthly PC giveaway, its CEO, Noah Katz, withheld the prize from one of his company’s brand ambassadors. His reason? The streamer didn’t qualify for the prize because she had fewer than 5,000 followers across her social media accounts. Additionally, Katz had this to say: “This person has 3 months of ambassadorship and not a single click… not even once.” Unfortunately for Katz, portions of the giveaway stream that showed what he did was clipped and shared on Twitter. The video snippets received over 2 million views, with replies, likes, and retweets that numbered in the thousands. Artesian Builds received widespread social media backlash from both the streaming and gaming communities. Moreover, Intel Corporation, one of the company’s major sponsors released an official statement about what happened: "We strive towards welcoming streamers of all sizes to our programs and do not agree with recent negative comments directed toward small streamers. We are reaching out to relevant parties to address the situation." In response, Katz posted a now-deleted written and video apology on Artesian Builds’ Twitter account. In his statement, he took full responsibility for the incident and offered the prize back to the streamer, but the individual declined. Despite Katz’s public apology, his company still received public backlash. To make matters worse, Artesian Builds was hit with a sudden wave of refunds in the aftermath of the controversy. By March 9, 2022, the company shuttered its operations and filed for Chapter 11 bankruptcy with over USD 3 million in liabilities and an estimated USD 1.37 million in unfulfilled orders. As of now, it’s uncertain what exactly caused the system integrator’s collapse. However, two anonymous ex-employees commented that Katz’s mismanagement was to blame. Prior to the controversial livestream, they said he had been looking for new investors for the company. While the controversy isn’t the primary cause of Artesian Builds’ collapse, it still had a part to play in the company’s demise. After all, a firm whose name has been damaged isn’t exactly the type of business investors would want to invest in. A Tarnished Reputation What happened to Artesian Builds’ reputation in the span of a few days can be explained through RDS’ first tenet: Ethically maximize wealth. According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven”: “The power of the firm’s constituents can drive a company’s performance and valuation to new highs or to record lows in very short order. Certain types of business activities can draw great levels of anger from these groups. While businesses appear to be resilient to mistakes of many kinds, nothing appears to negatively impact a firm as much as when these groups decide that a business has engaged in gross unethical conduct.” By taking away the prize the brand ambassador won, Katz angered not only viewers, but customers as well. When this happened, his company suffered from reputational and financial damages because what he did was viewed as unethical. Remember: You should always take into consideration the ethical standards of your business’ customers, investors, and employees. Failure to do so will lead to widespread public backlash and financial damage. If you're looking to gain a better understanding of RDS, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful.     Stay tuned for next Tuesday’s Return Driven Strategy! Glenayre was one of the first top mobile communications companies in the world. Its offerings included enhanced services, unified messaging, advanced messaging services and devices, prepaid wireless and card services, and networking infrastructure. Learn more about these two business case studies through the lens of Return Driven Strategy’s Tenet 6 in next week’s article!