Listening: A Strategy and Marketing Blog | Hosfeld & Associates

By Kathleen M. Hosfeld

Companies engage in sustainability initiatives in stages.  Starting small, and usually with operations-oriented steps, companies’ first experience with sustainability is focused on saving money.  Creating new revenues from sustainability happens at deeper stages of engagement.  At these deeper stages, marketing, which may have been only peripherally involved before, now plays a strategic role in creating new opportunities to fulfill sustainability’s potential to the company and to stakeholders.

We’ve written before about the various stage models of sustainability engagement and how marketing shows up at each stage. In the early stages, when companies are experimenting with waste, energy and resource management issues, their focus is on cost savings. This doesn’t translate well to marketing action, although in some rare cases, such as Cisco’s used equipment recycling program, it can become a new line of business.

Changes in the environmental features of products and services that occur in the middle stages of sustainability engagement can prompt marketing departments to redefine their respective value propositions. They can also activate marketing’s promotional, publicity and public affairs capacities to manage perceptions around green washing (allegations of superficial claims of environmental benefits).

At the deeper levels of sustainability engagement, where companies seek to fully integrate sustainability into product and service design and business model development, marketing plays a strategic role. At this stage, the ability to research and interpret customer wants and needs is essential to tapping the top line potential of the commitment to sustainability. It’s a significant opportunity for marketing to make a strategic contribution to the direction and focus of the organization.

Team-Based Innovation Planning: Baking it In

Up to this point, the changes the company has been undergoing are technical changes. You can hire a consultant to help you conduct a lifecycle analysis, measure your carbon footprint, advise on resource, energy and waste strategies.  But redesigning and re-imagining whole products, services and lines of business from a sustainability standpoint is “adaptive change.” At this stage, sustainability has been bolted on, now the task is to bake it in from scratch. It’s probably not something that anyone in the organization has done before. As a result, executives assembling and commissioning teams to do this work need to consider how best to convene, commission, guide and support them.

Start from the Future – In the September 2009 edition of Harvard Business Review, R. Nidumolu, C.K. Prahalad, and M.R. Rangaswami write about research they have conducted with 30 companies integrating sustainability into their operations. “Don’t start from the present,” they advise.  Rather, start from a desired future state and work back. When Hosfeld & Associates works with clients on these issues we like to start with the question: “What is the change we want to see in the world because of our work?” What business should we be in as a result?

Feed the Process With New Insights – At this stage of sustainability engagement, customers and other stakeholders can play a co-creative role. Effective design and implementation of customer and stakeholder research can tap insights that will feed the innovation process. Marketing specialists on the innovation team best help other departments interpret research and learn how to understand customer needs.  Great ideas can also come from anywhere in the organization.  Effective approaches to sustainability innovation will tap the hidden genius of the organization.

Build Engagement From the Start — The result of the planning process will be a strategy that must be implemented. As my colleague Ron Benton says “to be effective, strategy has to be constructed and owned by those who execute it.” This means creating cross-functional teams across organizational silos that can work together to solve complex problems. It also means creating opportunities for engagement during the planning process with those who may not participate directly in it.

Mitigate the Challenges of Change – As an adaptive process, strategic sustainability innovation has the potential to create anxiety. It’s important to anticipate the anxiety of change and provide innovation teams with new tools. Building the team’s capacity to have fearless, frank and authentic dialogue and move quickly through areas of disagreement is fundamental. This means using conflict and resistance as tools for learning. Clear objectives and metrics can also provide guidance and support for making good decisions, assuring engagement and supporting execution.

Keep It Moving – If the goal is competitive advantage, strategic sustainability innovation can’t get hung up on internal turf squabbles, or get squashed by the tyranny of day to day operations. Organizations seeking this type of advantage must support teams with clear direction and the resources to keep it a top priority.

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If you are interested in knowing more about how to integrate marketing’s capacity for innovation with your sustainability initiative, please contact us.

Check out the Sustainability and Innovation edition “How Green Will Save Us” Harvard Business Review

By Kathleen M. Hosfeld

Creating improvement in performance, marketing or otherwise, usually involves change. Many of us are keenly interested in any thing that creates positive change faster and with lasting results. So, I was intrigued when I  read that the science of neuroplasticity has some implications for how individuals and organizations can change. The headline: Focus on Solutions Instead of Problems.

This is something I thought I already knew. In the spring of 2007, we worked with a non-profit board focused on generating earned income from events. In researching what would increase attendance at their events, we tapped market research that explored how similar organizations and similar events elsewhere managed to do well. But one board member was flummoxed. “Why didn’t you research why people don’t come?” he asked.

We had, in fact, studied the surveys that talked about reasons people don’t attend events like his. In fact, the Executive Director of the organization had ordered and studied three white papers on why organizations like theirs had failed. I read those, as well as national studies on the challenges of similar organizations.

In order to turn things around, we had chosen instead to look at best practices of what others had done to solve their problem. What solutions were out there? What was already working? Having practiced “appreciative” approaches like this to marketing for quite some time, I was pleased to learn this fall that the implications of neuroplasticity for creating change in organizations supports this approach. The study of neuroplasticity concerns how the brain can and can’t be “rerouted” to support new ways of thinking and behaving.

According to an article in the Autumn 2007 Special Edition of Strategy + Business, focusing on a problem (”why does this keep happening?”) builds stronger neural pathways associated with the problem. An appropriate metaphor might be that it wears the ruts deeper in the existing road. Making new ideas possible (and new behavior) starts with focusing on solutions instead (”what will create a different outcome?”). Focusing attention on solutions helps build the short-cut between the road we’ve been on and the road we want to be on. So, focusing on solutions that are working is a faster way to create change.
While the non-profit I worked with did not ultimately adopt all the best practices we identified, the result of the assessment was hope. They had previously convinced themselves that their prospects were small. Now they had compelling evidence that others similar to them were making similar transitions and accomplishing their goals.  Compelled by this hope and a vision of greater possibility than they had imagined, they were able to chart a new course, recruit a new Executive Director and embark on a more successful program.
Focusing what you want to achieve, and new solutions to get there, are the keys to faster change and faster marketing results. The full article on Neuroplasticity is here at the Strategy + Business website:  You must register to read it but registration is free.

A financial consulting organization, working with business owners who had commingled business and personal assets, was frustrated by clients’ inability to move ahead with estate or investment strategies.  Their situations were so complex it was difficult to intuitively understand all the implications of the recommendations their advisors would make. Clients would get stuck. Time would pass. Often, nothing was done.

What their clients needed to see was a year-by-year picture of what would happen if they adopted a certain strategy. Without over analyzing the situation, the consulting organization started putting together spreadsheets that showed the relationship of the personal and business assets. They compared scenarios and showed the year by year comparison stretching out in time to retirement and beyond.

The consulting organization was so focused on the solutions they were proposing, they didn’t at first recognize the value of their spreadsheet tool.  It took some customer research during a strategic planning process for them to realize how much clients valued the financial models they created.

The financial models were what we call a “pearl” that had formed in the organization. The frustration they felt over clients’ inaction was like the irritating grain of sand that enters the oyster and eventually becomes the pearl.  The organization responded to the irritation by creating a new tool.

Upon discovering this pearl they had created over 15 years ago, the company was able to use it as the basis of a national expansion into new markets.  This pearl has been a consistent source of strategic advantage as their business has evolved through many market changes and economic cycles.

This is what we call a “stumble upon” strategy. It’s something already present in the organization that is working well. However, in many organizations the lenses through which members see their own organization are different than the lenses through which their customers see them.

What is the pearl that’s hiding in plain sight in your organization?

An emerging model from high-integrity organizations

By Kathleen M. Hosfeld

The phone rings at our house on any given evening. A member of our family looks at the caller ID. “It’s Evans Glass,” he or she calls out to the rest of the house. The call goes unanswered. This is one of between four to 10 calls we receive from Evans Glass each week. We made the mistake once of talking to someone going door to door offering estimates for window replacements. When we found out that the estimate process would take two hours, we said, “No, this isn’t what we want.” We asked that they not contact us again. They have continued to call. And call. And call.

This is one of the practices that have led to another kind of call – a call to “reform” marketing. These and other common marketing practices “work” for companies – they do result in sales. However, research shows that there’s a long-term consequence associated with intrusive and coercive tactics: cynicism and resistance on the part of consumers. Studies by the American Association of Advertising Agencies and Yankelovich show that from 1964 to 2004, the number of people who say their feelings about advertising have become negative grew from 15% to 60%. Forty-five percent of consumers say that the amount of advertising they are exposed to every day detracts from their experience of everyday life (Yankelovich). Yet, companies are spending more to overcome resistance, doing more of that which created the resistance in the first place. This is a vicious, self-perpetuating cycle.

What’s to stop it? Some believe that more regulation is the answer. While regulation and public policy always play an important role in systems change, a change from within – a transformation – will ultimately reach parts of the system that regulation can’t touch. Pioneering firms have been blazing this trail for almost two decades and research is starting to show that companies that take a higher road are achieving higher returns as a result (Studies by Sisodia, Raj, Jag Sheth, and David B. Wolfe in 2007; Sully de Luque et al. in 2008; Kearney in 2009).

The Emerging Model

Consider this article an introduction to a much wider conversation about how pioneering firms are transforming marketing. To start that conversation, I’m offering a 50,000 foot level management perspective of the model of marketing that is emerging as an alternative to the vicious cycle described above. This includes sustainability and the triple-bottom-line, but this is not a model of sustainability marketing per se. It’s meant to suggest a model of marketing that is emerging in companies who have made sustainability a way of life and are continuing to evolve. I have avoided references to tactical execution and, for now, case histories. I’ve avoided elements that might be more appropriate for specific industries (hard goods manufacturers), and tried to synthesize elements that are universal to all firms.

In working with clients, I often translate assessments into “Key Issues” for the sake of simplifying what must be addressed to accomplish their objectives. Key Issues are sheltering wings under which a variety of other issues or factors can find a home. In the following diagram and text, I frame three “Key Issues” for transforming marketing, and some (but not all) of the factors they represent.

A Fundamental Assumption: The most important difference between companies that are transforming their marketing practice is their interpretation of the purpose of marketing. In traditional practice marketing is about “selling stuff.” This follows the perception of the purpose of the business, which is to create profit. In firms that are transforming or have transformed marketing, marketing is about creating value for stakeholders – not as a means to an end (profit) but rather as the end in itself. Within this shift, profit is the measurement of how well the organization is achieving that end.

Embracing a Systems Perspective - A competence required for this emerging model is the ability to navigate complexity and engage with diverse, complex, adaptive systems. In transforming marketing, this includes issues such as:

Adopting a Multi-Stakeholder Orientation – In transformed marketing, the organization enlarges its focus from stockholders to stakeholders who include investors, employees, customers, partners and society. The intent is not to “manage” stakeholders but to serve them.

Cross-Functional Collaboration – In the traditional paradigm, marketing is frequently siloed and given increasingly tactical focus. In transformed marketing, value creation for stakeholders (marketing) is everyone’s job and requires cross-functional collaboration across departments – finance, human resources, manufacturing.

Industry Collaboration and Partnerships – Organizations transforming marketing are not isolated competitors seeking dominance and hoarding information. Rather they participate in industry collaborations to advance standards or other initiatives for the benefit of stakeholders.

Reclaiming the Marketing Mix – In traditional practice, marketing has increasingly focused on sales and promotion due to an emphasis on measurement. Organizations that are transforming marketing seek to maximize stakeholder benefit through all aspects of the marketing mix (product, price, promotion, distribution/sales). These marketing decisions may not take place in the marketing department per se but through cross-functional collaboration.

Creating Social Good – A radical departure from serving simply the profit motive, to one that says profit is the measure of how much value or benefit the firm creates for stakeholders. This includes issues such as:

Purpose and Culture Founded on Ethics and Responsibility – There’s a constant focus in these organizations around “doing the right thing,” which begins with purpose and a culture that supports ethical action.

Defining Success Beyond Profit – Financial measures are insufficient determinants of success for many organizations who care deeply about their impacts on the environment, on customers, on employees, vendors and more. Whether it’s two, three, four or more “bottomlines” – transformed marketing evaluates success in more than financial terms.

Organizational “Calling” – Those practicing transformed marketing are guided by goals that serve a shared understanding of the organization’s “calling” or intent to create stakeholder (or world) benefit.

Sharing Power in Exchange Relationships – Transformed marketing seeks to create partnerships with stakeholders in which power is shared. This capacity separates these organizations from those that are merely well intentioned, yet feel entitled to cajole customers into decisions that are “good for them” or to “sell what we make” without meaningful input from the customer or market.

Living the Brand – From one perspective brands are “perceptions” that are created to influence purchase decisions. In organizations practicing transformed marketing, however, the brand IS the company, and the company lives the brand. It’s not perception. It’s reality. Branding campaigns seek to create awareness of that reality, not to create it virtually. Elements of this include:

Brand Rooted in Clear Differentiation Strategy – In transformed marketing the brand is rooted in a solid business model that articulates a long-term strategy for creating value for stakeholders distinct from that of other firms. By contrast, head-to-head competition or competition on perception alone reinforces the vicious cycle of promotion to compete, leading to ethical “trade-offs”, and a firm-centric view.

Operations Aligned to Fulfill Brand Promises – The “operational side of branding” means taking the brand deeply into every aspect of the organization. This requires translating the implications of the brand for the day-to-day functions of departments. Representative questions to ask in this process include: What type of person should we hire to reflect the brand values? How does the brand change what our office looks like? How do I need to share information with other departments in order to help them live the brand?

Commitment to Stakeholder Benefit - The “right thing to do” in a transformed marketing environment is a radical commitment to making sure all aspects of brand execution translate into benefit for stakeholders. This includes ongoing reflection and action concerning methods of creating products/services, their features and benefits, the materials they use and the transparency with which the supply chain is managed.

Continuing The Conversation

Although the era of sustainability shines a brighter light on companies who practice marketing in this way, many companies – including ours and our clients’ – have been marketing in the spirit of the emerging model for years if not decades – long before frameworks for sustainability or the triple bottom line were as accessible as they are today. As more organizations adopt social enterprise models and similar forms that blend mission and revenue creation, transformed marketing offers an approach that better fits their values.

Many of the companies who have been pioneering in this model have done so based on the intuitive conviction that it was simply “the right thing to do.” We are fortunate in this time that research, including the studies referenced above, is confirming their collective hunch that a seemingly radical commitment to marketing that works for all also turns out to be a good way to make money. Many today are trying to approach the triple bottom line from a single-bottom-line perspective. Perhaps now there’s enough empirical research to encourage such firms to explore this emerging model more deeply.

There are many stories to tell and many interrelated ideas to unpack as we continue our own exploration. We’d love to hear from you about your experiences, ideas and questions.

Speaking on NBC’s Today Show, Tuesday, April 14, 2009 White House economic adviser Christina Romer tried to convey a glimmer of hope even though the administration expects job losses to continue.

Romer said in spite of this, the economic programs of the Obama administration are starting to have an impact.  She said that the country is “seeing signs that the programs are working, that we’re seeing a sense of some parts of the economy are starting to find their bottom.” Listen to her quoted in this NPR story.

Civic and recovery-minded business leaders take note: we now have a new step to take to aid the economic stimulus — Find Your Bottom.  I know where mine is. How about you?

Periods of economic uncertainty and transition place greater demands on organizations to engage in adaptive change processes. As a result, the idea of “what really works” in strategic planning has changed dramatically in the last 15 years.

Added to this are increased employee expectations for engagement, collaboration, and the opportunity to create positive social and environmental outcomes through their work.

• What really works in strategic planning?
• What must clients do to ensure a high quality process and outcome?
• How do we build progressive values for success and meaning into both the strategic planning process itself and the resulting strategic plan?

What Really Works In Strategic Planning?

Following we provide insights about what works in strategic planning, followed by some of the reasons traditional planning may have failed in that regard.

When the strategy is clear to everyone. Strategy needs to be simple enough for anyone in the company to understand.

• Avoid top-down approaches. Many organizations suffer from planning that goes on at the most senior level of the organization and doesn’t integrate wisdom from “the front lines.” Top-down planning also suffers as a result of a lack of understanding and buy-in. The most effective approach is one that combines top-down and bottom up approaches.

• Numbers aren’t the whole story. Strategies that are about hitting particular financial targets alone aren’t really strategies. Financial targets are goals that we want the strategies to deliver.  A strategy is the mobilization of company-wide efforts needed to create the desired outcomes. Financial targets are the “what.” Strategies are the “how.”

• Create shared language. The language of the executive office is often financial, but that doesn’t “translate” very well in other parts of the organization. Using planning tools that create shared language in all departments and levels of the organization helps make the strategy clear.

The strategy is resilient. One common critique of strategic plans is that they are obsolete as soon as they are written. Resilient strategies are based on organizational strengths and assets that have long-term strategic potential.

• Avoid strategies that are “borrowed” from other companies. Some companies try to copy what they see working for their competitors or peers in their industry.  While great ideas can often be picked up from others, successful strategy is based on the unique assets and strengths of each organization.

• Base strategic plans on long-term opportunities, not short-term trends. A very common practice in organizations is to mistake tactical strategies for strategic planning. A short-term market opportunity then replaces organizational mission and strategy. Without balancing short-term and long-term, the organization short-changes itself on profitability and risks creating a culture driven from one crisis to another.

The strategy is fully implemented. Many organizations create reasonable strategies that are not fully implemented. When this happens, one of the following may be occurring.

• Invite people into agreement with the strategy. If the strategy process has not sufficiently included key perspectives in its development, the outcome will likely have opponents. Strategy processes that integrate differing views ultimately create stronger outcomes.

• Translate the strategy to day to day work. For many, the intuitive process of figuring out what strategy means for their work is fun and challenging. For others, it’s asking them to do the impossible.  Creating measurable action steps, and in some cases, metrics and financial targets, is a critical step in strategy implementation.

• Role model at the executive level and follow through. In order to give the strategy a chance, there has to be managerial commitment and follow-through. If the strategy was developed without their buy-in or if the strategy is not robust enough, managers will become fearful that it doesn’t address the reality of today’s challenges. If they face resistance because key perspectives weren’t addressed in planning, they may lose the will to enforce it. If no one seems to get the strategy, they may become frustrated and conclude the strategy “doesn’t work.”

The Client’s Role in Getting a Good Outcome?

Robust strategies that help organizations become more successful and profitable require quality input from the client.  Clients need to consider carefully if they can make these commitments in order to get a better outcome from a planning effort:

• Will you commit a reasonable amount of time? Although many processes take too much time and cost too much, it is also true that you can’t craft a robust, fully articulated organizational strategy and action plan in a weekend retreat with a SWAT analysis and a brainstorming session.  A reasonable amount of time for strategy development is 6 to 9 months. This time frame allows for comprehensive organizational and competitive analysis, as well as client research. During that time, the strategy process should not bring day to day activity to a halt. Rather, the process should feed new information into daily operations on an ongoing basis.

• Will you create opportunities for participation at all levels of the organization? Finding appropriate ways to tap the genius of the entire organization are essential to crafting practical, doable strategies and engaging the entire organization it their implementation.  Strategy design isn’t necessarily a consensus process, but there must be broad input and dialogue. Some of the best strategies and innovations are “stumbled upon” in the initial stages of planning. They sometimes are small, unnoticed or under-valued aspects of the organization that only emerge with broad participation.

• Will you ask clients or customers what they really want? Committing the time and money to conduct client research is essential to strategy design. The primary sources of break-through innovations and thinking are efforts that solve clients’ problems in new and unique ways.  WE all have our own standards of what quality or good work means. It’s important that we not mistake that for what customers or clients truly value. One of the key elements to sound strategy is focusing on what creates perceived value for clients. The only way to find out what creates perceived value for clients is by asking them. Without research, strategy making devolves into guesswork.

Creating Both Success and Meaning Through Strategy

“A path without heart is never enjoyable. You have to work hard even to take it. On the other hand, a path with heart is easy; it does not make you work at liking it.”
-    Carlos Castaneda, The Teachings of Don Juan

Employee loyalty and enthusiasm are two of the greatest strategic assets of any organization. We tap the potential of these assets when organizations serve a purpose that creates meaning for their work.

Organizations can create meaningful engagement in the ways they conduct strategic planning exercises, as well as in how they incorporate values and mission in the resulting plans.

Strategic planning processes can create anxiety and uncertainty, over and above that generated by the changing dynamics that make the planning process necessary. The following elements can help organizations bring out the best in their people as they go about strategic planning processes.

• Collaborative Engagement – Creating opportunities for engagement, dialogue and input from all levels of the organization is essential to creating understanding of and support for strategic plans. It is also the primary way to tap the genius within the organization to find its own solutions.  While we do not conduct planning from a consensus model, we do design ways to get engagement and information efficiently and in ways that make participants feel heard and valued.

• Build On What’s Already Working – Focusing the organization on what’s working creates hope and a foundation upon which to build new strengths. What do clients or customers already really appreciate and want from the organization? What’s the opportunity to leverage existing strengths and capacities for further growth? What are the “stumble upon” initiatives that are working that can be amplified?

Additionally, strategic planning offers an opportunity for organizations to step back and integrate social and environmental values and opportunities into the core business. In 2008, almost 60% of companies surveyed by McKinsey and Company reported that they were integrating environmental and social missions into their core strategy to a greater degree than they were five years prior. Although cost savings and new marketing opportunities motivate some of these initiatives, such practices also attract top talent. “Recruitment and retention consultancies like Kenexa, Hewitt Associates, Robert Half, and Towers Perrin have published figures demonstrating a link between environmentally friendly workplaces and engaged employees,” writes Andree Iffrig, author of Find Your Voice at Work: The Power of Storytelling in the Workplace (Limegrass 2007). Environmental and social values pave the path with heart that employees want to walk.