Listening: A Strategy and Change Blog | Hosfeld & Associates

Noticing the gap between what consumers say and what they do.

Recently the radio industry was rocked by the results of using new listening measuring devices to monitor listener behavior. Called “People Meters,” the devices “listened” to the sound in the room of the person wearing them, and recorded what stations they picked up. Prior to the use of these devices, people kept journals of how many hours a day they listened to particular stations. What people reported was that they listened to National Public Radio stations and classical music stations. What the People Meters revealed however is they were actually tuning into easy listening , oldies and country western stations. This is something like reporting that you read National Geographic, Scientific American or Town and Country magazines, when in fact you’re actually reading People, Cosmopolitan or Seventeen.

The difference between what we know we should do and what we actually do is something that smart marketers have noticed for a long time. It’s a lesson many forgot in the dot.com bubble days when focus groups asked people to evaluate whether or not they would use a certain Web technology in the future.

The Hartmann Group, a Bellevue research firm, has explored the gap between our so-called “new thrift” and the actual purchase behavior of many consumers. We clip coupons for the grocery store, but then go out and buy an iPhone. This phenomenon helps us understand why people report that sustainability is very important to them, but their purchase behavior doesn’t necessarily confirm it.  Read more here.

By Kathleen Hosfeld

I’m a fan of perspectives that make sense of seemingly conflicting points of view. This is why I love PEAK: How Great Companies Get Their Mojo From Maslow by Chip Conley.

Conley, owner of the Joie de Vivre boutique hotel chain in California, writes about his own and others’ experiences in cultivating deeply satisfying relationships with employees, customers and investors (this book is a very readable compendium of stakeholder marketing ideas). His stakeholder strategies ultimately contributed to the survival of his company in the travel industry meltdown following 9/11. He based his methods on the teachings of psychologist Abraham Maslow.

“Maslow believed that human beings seek to meet base needs for sleep, water and food (physiological)” Conley writes, and that we focus on the lowest unmet need at a time. “As those needs are partially fulfilled we move up … to higher needs for physical safety, affiliation or social connection, and esteem.” Finally, we aspire to the top of the pyramid which is self-actualization.

Conley used Maslow’s hierachy to map out how his company satisfied these needs for employees, customers and investors (his key stakeholders). His book provides a wealth of detail on how his firm did this, how others have done it and how to apply this to your own firm.

So what conflicting points of view does he brings together?  Depending on your own view of human nature, as a marketer you may find yourself believing one of the following views about how to win customers: 1) customers act from their most base needs (bottom of hierarchy) or 2) customers act (or should) from their highest motivations (top of the hierarchy) and values.  This dichotomy shows up starkly in branding and advertising models, many of which assume we make all our purchase decisions with the most primitive part of our brain. There’s a tension between these and the strategies that try to sell products based on “doing the right thing,” assuming green or social criteria will make a difference. (They can and do, but sometimes not enough).

The truth that Conley articulates so well is that good marketing and good relationships address both of these polarized views and all the needs in between.

Take customer relationships for example. The most basic need a customer has, according to Conley, is that we meet their expectations. Our products and services have to do what they expect them to do. He points out, however, that this alone rarely creates loyalty or the more-coveted evangelism.  Fostering loyalty means identifying the desires customers have, which are typically desires for social connection/belonging and esteem. Evangelism comes when we offer customers the opportunity for transformation and self-actualization – to be more fully themselves, or the self they long to be.

This is solid advice for any firm that thinks it’s not tapping the full potential of its customer relationships. Start with the basics: Are we clear about what our clients expectations are for our product or service?  Are we meeting their survival and safety needs? Second, how are our relationships and interactions – do we provide warm customer service? Do we make our clients feel important and valued? Finally, do we offer our clients an opportunity to be more than just a consumer?

At Joie de Vivre, they meet the top of the pyramid by offering what Conley calls “identity refreshment.”  You stay at a hip hotel and you feel like the hipster you want to be. Through examples such as Harley Davidson, Whole Foods, Apple Computer, the high tech service group Geek Squad, as well as his own company, Conley provides numerous creativity-sparking stories and examples.  The book is packed with tips for how to apply these ideas in your own firm.  Equally valuable are his suggestions for building strong partnerships with employees and investors.

Can companies do reasonably well at the bottom or the middle of the hierarchy? Certainly. If you aspire, however, to levels of relationship that create evangelists for your brand, and resilient companies that can withstand volatile economic cycles, says Conley, you need to deliver value at all the points along the hierarchy: survival, success and transformation.

By Kathleen M. Hosfeld

It’s not what Seth Godin may have said. It’s what someone else heard in what he said that I found intriguing. In a recent radio interview, a Seattle entrepreneur quoted Godin, a celebrated marketing author, as advising people to refine their strategies when times are difficult. He said Godin had written that it’s difficult to steer when one is going swiftly down-hill (i.e. when times are good). That much I’ve been able to confirm is Godin’s advice. The interviewee went on to say that it’s when you’re on the uphill climb (visualize riding a bike uphill)  it’s time to focus on the right destination. So far, I’ve not been able to find where Godin says this exactly, but I think the entrepreneur has the right idea.

Many of us are seeing signs that the economy is improving, although long-term forecasts for jobs and therefore consumer spending predict a long recovery process. For this reason, now may be an excellent time for companies to invest in clarifying their value propositions and refining their competitive strategies.

What’s your personal value proposition? What’s the value proposition of your firm or its products or services? The term value proposition, like many, gets tossed around fairly indiscriminately. When we use it we mean a value propositions formulated according to a defined process.  A formal value proposition can be a useful tool for clarifying and stating what you offer, who you serve, what benefit you create and how you are different from other resources available to customers. Clarifying the value proposition allows firms to identify what is extraneous, what can be cut without compromising what keeps customer relationships strong, and what strengths to leverage.

For those who may never have created a value proposition before, or those who need to refine theirs, we offer a worksheet to guide your reflection.

Research becomes useful in two key places of establishing or refining a value proposition. The first place is understanding the benefit or value you create for the audience. Many a company has mistakenly offered a benefit to an audience that the audience didn’t fully appreciate. Companies that failed during the dot.com bust offered a value proposition that users didn’t want. It’s important to use research to see from the audience’s perspective how the firm, individual, product or service can create value.

The second place research is valuable is in defining the difference between your offer and that of the competition or substitutes. Many service firms and service professionals don’t know how they are different. Some firms don’t know the importance of defining that difference. Sometimes it takes research or an outside evaluation to determine how you are different, or how to build more unique advantage into what you offer.

Social and environmental benefits or differences are emerging as important criteria to all stakeholders as the economy recovers.  If your prior value propositions have not addressed them, now is a good time to review and update them.

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.

By Kathleen M. Hosfeld, President

Recently, as I was browsing the “management” books aisle at a favorite bookstore, I pulled down a book on marketing and opened it to the first chapter. “Marketing is war,” the author wrote. Furthermore, he said, if the reader didn’t have the stomach for war, then “get out.”

We live in an interesting time in which the structures of one era exist side by side with those of a new one that is emerging. On the one hand we have the “business as machine” and “marketing as war” metaphors. In the early days of the corporation when people were trying to get their heads around how to direct large workforces – which were new to their experience – the only reasonable comparison was the mobilization of troops and resources for war. At about the same time, people were trying to make management and the enhancement of human work performance into a science.That meant breaking down work roles into components, isolating variables and trying to measure them for potential improvement.

But a metaphor is just a lens. Sometimes it doesn’t help us to see all that we should in a situation. Sometimes it colors our perceptions in ways we don’t want. In the last several decades many have been looking for metaphors that reflect the more dynamic aspects of organizations, markets and economies – the parts that seem to elude our attempts to control them. They are looking for metaphors that are more comprehensive than war.

One metaphor to explore is that of “marketing as a garden.” Many have suggested that economies are living systems and bear resemblance to dynamic ecosystems. Let’s make a distinction between a wild ecosystem and a living system that has been shaped by human intention. A garden is a living system that exists because a human being or human beings created it. While we don’t have control over all the dynamics in the garden, human influence determines a great deal of what occurs. Our organizations, markets, industries or economies might be considered gardens shaped by human actions, but still influenced by forces outside human control.

Two interesting ideas emerge when we consider the idea of marketing as a form of tending a garden:

There Are No Departments in a Garden

First, when we look at the dynamics of a living system, we discover that it’s difficult to completely separate all the processes at work into discrete boxes. Managers today tend to make artificial distinctions between marketing and management, finance, manufacturing, research and more. The distinctions will depend on how one defines marketing itself. Let’s assume that our definition of marketing, for the moment, is the actions of an organization to attract and keep customers. We could say that price-setting is a marketing function. But frequently a marketing decision is also a management decision. Price-setting is determined in part by knowledge of what the customer can and will pay. But it is also a management decision that has to reflect the costs to produce and the company’s goals for profit. Product development is another example. The design of a product impacts the customers who will be interested in it; it’s a marketing issue. It’s also a management and manufacturing issue.

The choosing of which customer segments/markets to enter is often reserved for senior management and strategists. This can also be a marketing decision; marketers have experience in the field that helps determine which segments are the best fit for the company’s strengths. Marketing is actually a set of complex, interrelated actions/decisions taking place within a dynamic system. This is mirrored in the nature of living systems, where various natural “sub-processes” serve multiple functions – those that can be compared with marketing and those that are more “management” functions.

One conclusion that can be drawn, and has been drawn already by theorists, is that a system view of business means that marketing can’t be separated from management. The silos we have created between marketing and other organizational sub-systems are artificial distinctions that actually impede interaction needed for the optimal health of our garden/our business.

“Too Much Alike” Increases Intensity of Competition

A second interesting idea comes when we consider the nature of competition in a living system. As some have sought new metaphors of organization, they’ve thrown out the idea of competition completely and replaced it with the ideal that all companies should just “get along” and collaborate. If we look at living systems, however, we have to accept that competition is a fact of life. Only just so many organisms can be supported by the resources found within the boundaries of a specific ecosystem. Only just so many companies can serve the same set of customers with a similar product.

What we find in living systems, however, is that the more similar two competing organisms are, the more intense their competition. Conversely, the more differentiated two competing organisms are, the more likely it is they will achieve an equilibrium that allows both to prosper. In business, we see this when two companies operate too similarly and offer the same essential product or service – they  compete more intensely. Companies that do not compete head-to-head are more likely to peacefully co-exist, or even partner, with others in their marketplace. This second lesson from living systems underscores the need for organizations to develop and sustain strategies that set them apart in ways that are meaningful to customer.

These two implications are likely just a starting place for cultivating the metaphor of the garden. What can you see through this lens? Plant the idea in the back of your mind and see what sprouts.

Note: Some of the ideas within the following journal articles contributed to this essay: The Anatomy of Competition, by Bruce Henderson, Journal of Marketing; and General Living Systems Theory and Marketing: A Framework for Analysis, by R. Eric Reidenbach & Terence A.Oliva, Journal of Marketing.

By Kathleen M. Hosfeld, President

A McKinsey Company study, commissioned by The Marketing Society, recently found most CEOs believe that although marketing has a vital role to play in addressing business challenges, they question marketing’s overall contribution to financial results. The potential of marketing’s possible contribution is not fulfilled.

In some situations, the perception is caused by a lack of measurement. The organization hasn’t measured the “before” and “after” pictures of an otherwise good program, and just can’t tell what part of the mix is working or not. But in many instances this perception points to an underlying weakness in either strategy formulation or execution. “Marketers are the heart of the business but not the head,” said one CEO interviewed. Head and heart must work together.

What this involves is building clear definition of the business model, collaboration between marketing and finance, widespread understanding and support for the business model, and alignment of individuals’ goals and objectives with the key components of the business model relevant to their jobs. Here are three questions that help determine where each organization can start:

Do you have a strategy? A plan is not necessarily a strategy. A strategy would be an actual business model that shows how activity will overcome challenges and lead to financial return. Too often the concept of “marketing” is interpreted only as marketing communications – which can be thought to include advertising, public relations and brand-logo development. A business model includes product or service design, distribution strategy, sales strategy, customer and account management, pricing and more. This careens dangerously into the area of “finance” which is considered a weakness of marketers, according to the McKinsey study. One way to bring head and heart together is to forge a collaborative relationship between marketing and finance that reflects a holistic sense of the organization.

Do people understand and support the strategy? “Understand” would mean they get the rationale of it, how the strategy “works”, what it will accomplish. “Support” means they agree with the strategy and reflect that with their actions. Everyone knows what it’s like when our own head and heart are not in agreement. It’s painful when the head doesn’t support what the heart wants to do and vice versa. While it’s often impossible to get 100% understanding and support of a strategy, each organization needs to do the work to engage the right people. Many employees will say they don’t want to be involved in strategy education or engagement. “Just tell us what you want.” This is often a mask for cynicism about whether the organization is really committed. “Why buy in when the wind is going to blow in a different direction six weeks or six months from now?” they ask. Employees measure management support for a strategy by the extent to which they “stay the course.” For full return on investment (ROI), then, the marketing strategy must manage and renew the engagement and support of the company for a sustained period of time.

Does everyone know what it means for their job? The head and heart are willing, but the flesh is…well..confused. Strategies are often crafted by highly intuitive people who think the implications of the strategy are clear and obvious. Many people however need help to determine what a strategy means for their job or their department. Organizations that fail to do this translation create a disconnect between the strategy and how members of the organization interact with the world. Often, some type of training or staff development is necessary to make sure all employees are living the strategy, including how they demonstrate brand values and promises in their day-to-day activities.

One of my colleagues, Hans Carstensen III, created broad participation in his company?s business model through creation of a companywide budgeting/planning system that tied goals and objectives in a clear way to the desired performance of a part of their business model. Each goal or objective for the $7.0 billion-in-assets insurance company had a “key performance indicator” (KPI) selected by the unit manager and the position-holder; these were monitored throughout the year. Bonus compensation was tied to performance. “The result,? says Carstensen, “was that everyone had a stake in and a sense of how their position was contributing to the business model’s overall success.”

Strategic management tools the “balanced scorecard,” systems thinking, integral theory, learning organizations — reflected in the three points above are all great ways to see the organization the way your customers see it, to tear down the barriers between head and heart to create a more aligned, successful organization.

Another important step in bringing head and heart together is aligning the business model with values and purpose, and our design to make the world a better place. We?ll save that enormous subject for another article.

By Kathleen M. Hosfeld, President

Three questions can help organizations connect their strategies and brands to The Great Story, the important work of our time. I first realized the value of the “great story” more than a decade ago, in listening to my retired father and a colleague reminisce about their days in the aluminum industry. At a dinner together I heard the two former executives wax nostalgic.

“It’s not the same as when we were there, Bob,” his friend Clay said. “All these young guys care about is their careers. You and I, what we cared about was aluminum.”

The reverence with which he said the word aluminum went beyond the value of excellence, beyond the pride of creating quality. Mass production of aluminum changed everything – from airplanes (once made of wood and fabric), to rail cars, to building construction materials, to medical tools, to food storage. Aluminum was the metal that would carry us to the moon.

The power of aluminum to create a better world was the kind of purpose that called for service beyond self-interest. It was clear in the way Clay said the word aluminum that to him it meant a brighter future for his children and grandchildren. That future was worth his dedication and creativity.

Whether we work in a for-profit or a non-profit, for government or private enterprise, the larger story of our work makes it worth the best we have to give.

The Three Questions

In strategy work with clients, I’ve found that defining the organization’s purpose around something compelling to people both inside and outside the organization depends on answering three questions:

• What is the change we want to see in the world because of our work (shared vision)?
• What are the means we will use to create this change (shared means)?
• How do we want to be together as we do this work (shared values)?

Seeing the Change

When we ask the question, “What is the change we want to see in the world because of our work?” we assume that we have a degree (if small) of influence over a vast system. The question implies we’re looking for a point of leverage in the system. Another way to ask the question is “Why make a change at all? What is the need?” Sometimes, we already know the change we want to create in the world – more home ownership, greater fuel efficiency, healthier kids, engaged citizens. We can look around us and see that others care about this same change because they too are working in their own way to address this need. This gives us a sense of who our partners, collaborators or competitors might be. Most of us are unaccustomed to thinking about our work in terms of our impact on the world. Some entrepreneurs respond to this question by realizing they’ve lost track of their original goals for their business.

Creating the Change

The next question, “What are the means we will use to create this change” defines the day-to-day tasks and methods you use to achieve your goal. A technology support division of a local city government might have a goal to become an essential resource to the entire city system. But there might be many roads to get to this shared destination. Is it through superior help-desk solutions? Is it through catalyzing technology upgrades? Defining shared means is an agreement about strategy.  Clarifying “shared means” results in focus, and thus creates greater return on investment of learning and capital. It often requires sifting through what others (competitors or collaborators) are already doing, what your organization does best or most successfully. It also means listening to what customers or other constituents validate as meaningful. This validation can be purchases and customer loyalty in a for-profit venture. In a non-profit it can be expressed through grants and donations that support the work.

Being The Change

How we create the change is very often influenced by asking “How do we want to be together as we do this work?” This speaks to something very different than the values statements senior managers post on bulletin boards for everyone’s compliance.  This question gets at the underlying values that reflect how we want to be treated or how we (the people) agree to treat each other in the workplace even when there’s no external reward. Creating alignment between the goals and organizational culture creates integrity; it says “we walk our talk.”  For many employees, agreements about how we want to be together can be as important as the change we want to see in the world. Positive social networks, being a valued member of a productive team, and the ability to take pride in their work create meaning for many employees that brings out their best contribution. These agreements can create stability at times when the larger strategic vision is shifting.

Answering these three questions benefits an organization in several ways. It:

• Creates efficiency through clear focus and alignment resulting in faster progress and fewer wasted resources;
• Articulates a compelling foundation for brands and other marketing messages;
• Fosters productive social connections among employees who then share the same goals; and
• Establishes a positive purpose for the organization in the context of a larger, dynamic system.

These questions and their answers lead us back to that place of the great story of our work. We’re not just telling a good story about our company and work as many corporate storytellers do. Rather we are seeing the Great Story of our time, finding our place in a story that is bigger than us, bigger than the place we work, and committing ourselves to work that is worthy of our passion and service. This is living a great story.

(This article was originally published in March of 2005.  My father, Bob Hosfeld, an Alcoa executive, contributed significantly to the original version. Its continued publication is dedicated to his memory and his legacy as a “spiritual advisor” to his colleagues.)