Listening: A Strategy and Change Blog | Hosfeld & Associates

By Kathleen Hosfeld

Following a recent Special Report by the Wall Street Journal, commentators had a field day with columnist Dr. Aneel Karnani’s assertion that the concept of Corporate Social Responsibility is fundamentally flawed.  Many of the comments pointed out that not only was his analysis fundamentally flawed, it was the “same ole, same ole” whateverness we’ve been hearing from free market idealogs for the last 15-20 years.

Karnani, who is Professor of Strategy at the University of Michigan’s Stephen M Ross School of Business, asserts that all CSR initiatives have to “pencil out” financially before they are embraced by CEOs. “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.” See the article here.

Based on the interviews that Pat Hughes and I did for her study: “The Leadership of Sustainability,” and my work with clients, my perspective is that engagement with CSR or sustainability evolves.  Some leaders we spoke with started with a “because it’s the right thing to do” mentality. They kept their experiments small to see if they would hurt or help them financially. If it didn’t hurt, they kept going. In businesses where CSR or sustainability was not baked in from the beginning, it is developmental, occurring in stages.  As a result, early experiments have to be either revenue positive or at the least revenue neutral.

However, there are many firms who find that holding objectives for financial, social and environmental benefit simultaneously creates a crucible for innovation. They have broken away from the either/or thinking represented in Karnani’s article, and are now in the territory of Third Way thinking. Third Way thinking goes beyond hierarchical rankings of choices, one being the better “good” than another. Instead, it “holds the tension” between competing “goods” until a new solution appears that honors all of them. Harvard Business Review even published an entire special edition last summer about CSR and sustainability as drivers of innovation, citing breakthroughs of over 30 companies.

So, what is the Wall Street Journal’s problem? Commentators responding to the article repeatedly questioned the lack of balanced perspective, and a pattern of editorial bias against values-based management approaches. Companies every day are proving Karnani wrong with their actions. Is the Journal simply blind to the evidence? Or are the editors ignoring the firms who are doing well by  “doing good”  because they seem to be “outliers” rather than  mainstream. If they are intentionally disregarding outliers, then they do their readers a disservice because it’s in the outliers where the seeds of breakthrough innovations are sown.

By Kathleen Hosfeld

Few companies argue that fostering trust with customers and other stakeholders is an important business task. Where there’s disagreement, however, is what specifically fosters trust, and the degree to which trust between customers and companies – particularly as it relates to green or sustainability claims – is suffering.

Our academic partner, Jenny Mish, PhD., assistant professor of marketing at Notre Dame, explored this and other questions in her doctoral research. Her study, which explored food standards and sustainability, resulted in insights about marketing behaviors that foster trust.

Mish interviewed a wide variety of individuals representing institutions engaged in developing or promoting the use of market-based product standards, such as Fair Trade or organic, that specify reductions in negative environmental or social impacts.  She spoke with people in large corporations like McDonald’s, in government such as the United States Department of Agriculture, and  smaller, grassroots organizations such as the Portland, OR-based Food Alliance.

The spectrum of types of trust she found span from the very impersonal and institutional, to the highly personal, local and dare we say “intimate.”  Large corporations tend to look primarily at repeat purchase behavior to evaluate the degree of trust they’ve engendered with customers. Some companies evaluate trust on the basis of their ability to fulfill key expectations of sustainability performance. Still others evaluate trust on the basis of direct, personal interactions with customers, and the degree to which they had actual contact with customers and other stakeholders.

Her findings suggest that marketers may be able to foster trust three different ways:

Preserving the Integrity of the Brand: The least personal form of trust is embodied in the brand attributes that create a predictable customer experience. This is true even when the context is not sustainability or green attributes.  This calls for organizational and channel alignment to fulfill brand promises consistently, which means full commitment to green or sustainability standards…not merely claims that show up in features and benefits.

Compliance with a Market-Based Standard: A company’s ability to merit certification such as the USDA’s organic standard or Fair Trade, creates a type of performance contract with customers that fosters trust. Marketers may encourage their organizations to qualify for certification, but ultimately this will require cross-functional collaboration to bring operations into compliance. Standards that inspire trust are those that are either objectively evaluated (by government or third-party) or that are developed and supported by a wide coalition of contributors/stakeholders.

Designing Highly Personal Forms of Contact with Customers: A company’s ability to deal directly and personally with its customers, such as “meet the farmer” programs, can foster the most personal type of trust.  These programs are common in “local” exchange relationships, such as those formed at farmer’s markets.

One implication of the study, as I see it, is that human interactions (personal) are where trust can be lost altogether, or maintained in either an impersonal or highly personal and reciprocal manner. Mish’s study was not designed to explore trust as engendered by the sales process, but we know from other experience that the quality of those interactions also impact on consumer perceptions. While they make good marketing sense, authentic interpersonal relationships are usually not driven by marketing goals. They usually reflect a sense of “this is the right thing to do regardless” in the company culture, as is the case with local relationships described above.  They manifest from the shared values of everyone in the company.

Ultimately fostering trust is not a matter of choosing between these forms. It’s bringing all types of trust-fostering practices to the marketing agenda. The assumption is that if the organization is large, then personal interaction is not possible.  If we believe, however, that it’s the right thing to do, then it becomes an opportunity for innovation. There’s the marketing challenge — creating trust-engendering relationships between human beings on both sides of the exchange process, regardless of company size.

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Jenny Mish’s dissertation is “Centralizing and Decentralizing Forces in the Development of Sustainable Markets: A study of Food Product Standards.” It was published in 2009, by the University of Utah.

A Theory, That is Mine*, About Mainstreaming

*That builds on someone else’s theory

By Kathleen M. Hosfeld

Imagine a bell curve (or Ann Elk’s theory of a brontosaurus) which is very thin at one end, much, much thicker in the middle, and then thin again on the other end.  On the far left point is a small group called “innovators.” To the right of the innovators are the “early adopters.” In the much, much thicker part we find first the “early majority.” As the thicker part begins to decline again we find the “late majority,” and finally at the thin-again part we have the “laggards.”

You may have heard the term “crossing the chasm” and wondered what it meant. It’s an insight that builds on the bell curve described above, which was the work of Everett Rogers , author of “Diffusion of Innovations.” Geoffrey Moore, who penned the book “Crossing the Chasm,” used Rogers’ work to help market new  technology. Moore’s book centers on a key insight that applies to many types of change, including – my theory — sustainability in business.

Innovators snatch up new technology even before it comes on the market. Moore says they do this because “technology is a central interest in their life.” Early adopters, like innovators, are able to quickly perceive the potential benefit of new technology for their lives. They look to innovators as guides for what is worth trying.  The early majority also relates well to technology, but tends to be more selective. Its members need references and proof of concept before they invest. The critical point Moore highlighted is that winning the early majority is the key to profit and growth. Yet, insofar as many technology firms are made up of innovators and early adopters, it’s often hard for them to relate and sell to those who don’t share their passion.

Proponents of sustainability may face a similar challenge. The innovators – the Body Shop, Ben & Jerry’s, Tom’s of Maine – and locally Harriet Bullitt’s Sleeping Lady Mountain Retreat – were those for whom sustainability was a central interest of their life. They inspired the early adopters — Seventh Generation, Fetzer Wines, Whole Foods,  and others  –   many of which are now at scale and thriving. The next step beyond the second wave is to increase sustainability in traditional firms – to create the early majority.

But watch out for that chasm. The next step is a doozy. As Moore points out, a wide gulf separates the first two groups – innovators and early adopters – from the early majority, and the gulf has to do with motivation.  Innovators and early adopters love sustainability for its own sake. The terminology they use is “because it’s the right thing to do.” They want the potential early majority to love sustainability the same way they do, but the early majority doesn’t share their passion. As Moore says in his book, innovators and early adopters want revolution; early majorists want evolution.  They want proof that something works.  The chasm is built on these differences. To further sustainability, we need to find a way to bridge the chasm.

Three things will help:

Discernment. Companies that are just starting out are not going to be exemplary. They’re going to start small. The business community and media need to encourage nascent attempts and not crush them with premature accusations of greenwashing.

Empathy. A colleague of mine recently started a Seattle-based solar nonprofit. She came from a traditional business background but had an infectious passion for evangelizing solar energy. Members of the green community to whom she reached out for help treated her like an outsider.  The ability to take the perspective of others, understand their  frame of reference  is a critical success factor for creating change.

Experience. The early majority cares about what works in operating a business. The motivational bridge is the business case. In this regard, the best thing innovators and early adopters can do is share their stories of achieving and sustaining their own profitability, and how sustainability contributed to their success.

In a recently released MIT Sloan Management Review, most of the 1,500 executives interviewed didn’t have a business case for sustainability in their organizations.  Most said sustainability initiatives in their firms were a response to regulatory pressures. Regulation plays a crucial role in catalyzing change, but ultimately it only goes so far. Winning hearts and minds is the key to sustainability adoption, and that begins with meeting and respecting people where they are.

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Kathleen Hosfeld (Ms.) is a strategy and marketing consultant. She has a second theory.

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Hosfeld & Associates leads clients in the alignment of vision, purpose, strategy and brand. We join a community of others who recognize that new forms of organization are arising that have the power to positively reshape our economy and society.

As a result, our approach to purpose, strategy and change leadership is markedly different than traditional strategy firms. Unlike other firms that focus on short-term programs, we specialize in finding the unique elements of an organization that give it long-term strategic advantage. We guide clients in creating an adaptive framework that allows each organization to reinvent itself profitably over time to meet changing market conditions, while retaining its essential brand and market identity.

Unlocking this source of sustainable advantage takes both left-brain and right-brain processes, both head and heart. We create and facilitate team-based strategy design processes that intensify focus on priorities, align and engage stakeholders, and build strategic capacity within and across lines of business.

Through our associate network, we also support our clients as they take their purpose and strategy deep within the organization. Implementation services include leadership development, culture and change, as well as, of course, branding and messaging programs.

An initial consultation is free, and we invite you to contact us to discuss your situation further.

Please also browse our blog, where we share articles on strategy, purpose, sustainability, dialogue in business, and stakeholder engagement.

A representative list of our services:

Core Identity and Strategy
• Purpose/Mission/Vision/Values Creation
• Strategic Assessment and New Strategy Development
• Four Quadrant (Wilber) Mission/Purpose Analysis
• Brand Strategy and Alignment
• Institutionalizing Strategy and Brand

Customers, Stakeholders
• Stakeholder Analysis and Alignment
• Stakeholder Focused Process Redesign
• Customer Satisfaction Research
• Communication Strategy and Messaging

Leadership and Team Performance
• Executive Coaching
• Decision-Making and Improved Execution
• Mission Critical Team Coaching
• Dialogue, Crucial Conversations

For additional information please visit the Experience and Services sections of our website.

The future of brand building “will involve all stakeholders (in a)… fluid, uncertain world where a brand evolves in dialogue with others. This in turn will require both openness and trust.” So say Nicholas Ind and Majken Schultz in an article from Strategy + Business.

Pointing to two examples – LEGO and Robobank – of companies among other examples, the authors comment on how brand building is slipping from arms of marketers into the hands of managers who are tending the total customer or stakeholder experience. “These organizations have understood that brand building (even if the terminology of branding is not used) is a participative process involving the whole organization and is the responsibility of all employees.”

Critical success factors for organizations creating brands in this environment, we predict, will include the abilities to align the organization on compelling strategies based on stakeholder dialogue, to foster and facilitate dialogue among multiple stakeholders, to channel greater flows of information into, within, and outside the organization, and to build authentic trust with stakeholder groups.

Strategy + Business Article: Brand Building Beyond Marketing