Listening: A Strategy and Change Blog | Hosfeld & Associates

“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. Strategy design that reflects the path of the heart can build loyalty, engagement and commitment.

The following elements can help organizations bring out the best in their people as they go about strategy design.

• 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 a consensus model is an unrealistic way to make decisions in most organizations, gathering broad input efficiently makes participants feel heard and valued and strengthens the outcome. Co-constructing strategy with those who must implement it builds the most powerful commitment.

• 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 about and want from the organization? What’s the opportunity to leverage existing strengths and capacities for further growth? What are the nascent initiatives that are working that can be amplified?

• Integrate Social and Environmental Values — Strategy processes that reflect higher values create companies that 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 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.

By Ron Benton and Kathleen Hosfeld

With a global economy in slow recovery and many businesses fighting for survival, what is the significance of sustainability thought, practices, and execution in shaping a better and more prosperous world?  A just-released comprehensive global study conducted by MIT’s Sloan Management Review and partners provides some revealing and reassuring answers including the following:

• Sustainability is continuing to have a material impact on how companies think and act
• Sustainability is surviving the downturn
• Most firms are not decisively acting on the opportunities presented by sustainability
• A small number of firms are capitalizing on the opportunities and reaping the rewards.

What do these findings mean for you and your organization?  In general, the findings affirm that thoughtful investments in sustainability will positively differentiate early adopters in their industries.  The specifics depend on the issues your organization faces and where you and your firm are in your evolution of adopting and benefiting from sustainability practices.

The study also supports our assertion that engagement in sustainability has a developmental aspect to it.  It says that those who have experience in sustainability see more clearly the business case and strategic benefits it can offer. Those with less experience don’t have a clear sense of the business case for sustainability.  This suggests that a good way to explore sustainability is through a well-designed pilot. Well-crafted sustainability strategy projects can help companies explore the potential benefits of sustainability in ways that create value over the long and short term.
Read the MIT Sloan Management Report “The Business of Sustainability.”

Hosfeld & Associates and Ron Benton & Associates work together to offer services to help companies thrive in the sustainability economy. Additional details are available here.

By Kathleen Hosfeld

By a small miracle, I took part in a recent phone survey conducted on behalf of a local grocery chain that has recently built a new store in West Seattle, where we live. I say it was a small miracle as I’m usually screened out right away because of our work.  For some reason, they didn’t ask, and I didn’t tell.

As a result, I offered what I hoped to be really helpful information for the survey. I was somewhat taken aback when the interviewer called me again minutes later to say that some of my answers “didn’t fit their categories,” and her supervisor wanted me to  please provide responses that fit their categories.

What they wanted to know is who had the 1) best bakery, 2) best produce, 3) lowest prices. The answers that I gave that didn’t fit their categories had to do with sustainability.  One of the things I told the interviewer is that I choose my grocery stores on how easily I can walk to them.   I told her that organic produce was important to me. One of the things I would also tell them – but didn’t have the chance — is that I choose my grocery store on its citizenship, its support of local farmers, and the amount of local produce it offers. None of these criteria fit their survey. Within walking distance of my home, I have three stores that offer great examples of these qualities. They have great bakeries and good produce. One has low prices.

I realize that I am what they call an “outlier” – someone not in the mainstream.  (Or maybe I am in the mainstream but no one is measuring what matters to me, so there’s no data to back this up.)The lesson for companies: listen to the outliers. Give them a chance to give you an answer you don’t expect.  By ignoring the unusual, you may be ignoring the new paradigm that will change your industry forever. You may be ignoring a chance to see where your market may be going before it’s too late.

In an interview with KUOW’s Ross Reynolds, Temple University history professor and author Bryant Simon raised an interesting question for those of us engaged with the marketing implications of a commitment to sustainability. Simon has recently authored a book titled “Everything but the Coffee,” a book about the impact of Starbucks on culture and society.

In the interview Simon said that buying a cup of coffee whose brand values include fostering a sense of community (the idea of Starbucks’ locations as a social hub or “third place”) does not mean you will actually experience community. This, no doubt, depends on how one defines community. Simon’s definition, as expressed in the interview,  includes democratic debate and dissent. Fostering civic dialogue is not a core element of the Starbuck’s store experience so for Simon it’s not creating “real” community. For many of Starbucks’ customers, however, community may be like the old TV show “Cheers,” a place where “everybody knows your name.” Being a “regular” at a particular Starbucks (or any other coffee place), where the baristas know your favorite order can lead to this type of community feeling.

As he concludes the interview, Simon raises an important issue for those of us bringing the values of sustainability into brands and marketing strategies. He says that the values to which brands try to appeal may not be values that can be realized through how we spend our money. My paraphrase of his statement from the interview is that it’s good news if people really want the values that Starbucks promotes, because the brand promotes positive social and environment change. He says, however, if we think we are creating those changes simply by buying Starbucks coffee, we’ve missed the point.

“If we judge our desires by what we buy from Starbucks – if we want a greener planet, if we want more connections, if we want social justice around the world – (these) are values that could build a more democratic order. The problem is we’re not going to get them through buying,” is my rough transcription of his comments.

Purchase decisions alone are not enough to effect the cultural and political change that we need to address society’s most pressing environmental and social needs. However, purchase decisions are not irrelevant. Does buying a sustainable product relinquish us from the responsibility to be citizens who vote and take part in civic dialogue? No. But every purchase decision is a tiny vote for the things we think are important, and a way to support those companies who are sincere in their intent to create meaningful change through their work.

Listen to the archived interview here. Reynolds interview with Simon starts at minute 34 in the Real Audio file. I’d like to know what you think.

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

Sustainability and the Path to Transformed Marketing

By Kathleen M. Hosfeld

Many are the challenges facing today’s marketing practitioners as they seek to cultivate relationships with customers in a volatile economic climate.  As a chief point of contact between the company and its customers, marketing is a place where trust is either won or lost.  As many consumers cut back on spending, trust is one of the critical factors underlying purchase decisions. But research shows that decades of intrusive, coercive demand-creation efforts have created layers of resistance that are now compounding companies’ woes.

Is sustainability a business strategy than can transform marketing practice and begin the process of rebuilding trust? Sustainability, for the purpose of this article, is the management of an organization’s performance in service of financial, social and environmental objectives, with the intent of meeting “the needs of the present without compromising the ability of future generations to meet their own needs.” (Brundtland World Commission).

Transformed marketing is the emerging model of marketing practiced by high-integrity organizations, a subject I wrote about in The Transformation of Marketing. The relationship between transformed marketing and sustainability depends on the ultimate goal of both initiatives – for businesses to operate profitably in ways that create benefit for many diverse stakeholders.  In early stages of sustainability adoption, however, this shared interest may not be quite as evident. As engagement with sustainability deepens, the qualities of transformed marketing begin to appear.

What are the Stages on the Road to Sustainability?

The notion that organizations implement sustainability in stages of increasing engagement is held by a variety of consultants and thought leaders.  The Leadership of Sustainability, a study authored by Pat Hughes, (to which I was a contributing analyst) offered a five-stage model of sustainability development based on interviews with leaders from diverse companies. The five stages in that model were:

• Stage 1: Values (Awareness) Develop the will to take action.
• Stage 2: Action (Experimentation) Begin with a single project or experiment.
• Stage 3: Deepen (Systems Thinking) Explore implications of sustainability for all operations and decisions.
• Stage 4: Sustain (Resource Commitment) Commit to comprehensive plan with resource allocation (management focus, money), tracking and reporting.
• Stage 5: Learning and Advocacy (Sharing) Leadership and advocacy in industry; continuous learning.

Since the publication of The Leadership of Sustainability, at least two other staged models have been published highlighting different aspects of organizational engagement with sustainability. Peter Senge’s organization offers a model that describes the emerging “drivers” that push organizations deeper and deeper into engagement. Avastone Consulting offers a model that describes similar stages of engagement from the perspective or organizational perspectives or “mindsets.”

While not in exact agreement, these three models offer a surprisingly congruent picture of increasing degrees of intention and engagement.

Marketing’s Transformation on the Sustainability Road

Each stage of engagement with sustainability presents its own marketing challenges and opportunities. See Diagram. Large Format PDF Early engagement with sustainability is focused primarily on operational and administrative changes that reduce waste and conserve energy. The primary goal of most companies in the early stages is to save money.

At the Awareness Stage, marketers become conscious of consumer interest in “green” products and the role of environmental and social issues in purchase decisions. There’s also increased interest in cause-related promotion events that may have an environmental or social justice focus.

At the Action Stage, companies’ experiments with sustainability may not yet translate well into promotional or brand messages. Still, marketers begin exploring how to leverage the value of these experiments for marketing purposes.  They start to explore “green marketing” techniques (those tactics that have an environmental impact) and  eco-branding (building environmental values into brand image). They may explore the process of publishing sustainability reports, and take more concrete steps toward refining product/service line value propositions based on social, environmental factors. At this stage, they are also concerned about accusations of “green washing,” in which companies are accused of promoting superficial efforts of sustainability merely for their image/PR benefits.

At the Deepen Stage, however, both the organization and its marketing team are invited into the initial stages of what may lead to deep change. At this stage, the leaders we studied began to see the interconnections between their operational waste and energy strategies and “everything else.” They started to see the impact of such changes on their vendors or suppliers.  They began to see the potential response from community partners. They start to see the opportunities for collaboration in the community and industry to accomplish sustainability goals. According to other models, at this stage, companies also begin to see the opportunity in developing entirely new business strategies that integrate sustainability. Here we see a form of stakeholder marketing start to take hold as companies realize they have to manage increasingly deeper levels of conversation with the community, vendors, suppliers, and industry colleagues, not to mention  customers.  New business opportunities begin to emerge as companies realize consumers’ interests in seeing social and environmental criteria integrated into the company’s core products and services.

As a result, marketers who step up to the challenge may find themselves with new opportunities to lead conversations about the redesign of products/services for social, environmental factors and articulation of new pricing strategies.  Design and pricing conversations lead invariably to engagement with standards and certifications that assure truthfulness in marketing claims. As they begin to appeal to customers with sustainability oriented values, they’ll also be challenged to re-evaluate marketing tactics that are perceived as coercive or intrusive. And as companies grapple with multiple stakeholders and holding financial, social and environmental values simultaneously, they may determine that the metrics they’ve historically used are no longer adequate.

The Shift from Technical Change to Adaptive Change

As companies and their marketers continue to deepen their engagement, the changes that they are asked to make move from technical change to adaptive change. In technical change, we don’t fundamentally alter how we work. We add knowledge; we make incremental improvements in what we are already doing; and we stick basically to the strategies we’ve been using.

On the journey to sustainability, as in the path to transformed marketing, there’s a point where we are asked to begin to think differently about how we work.  Fundamental assumptions are challenged. We embark on new initiatives and enter new territory where few have gone before us. We have to take risks and learn together.

At the Sustain level of engagement, for example, marketers that have never before had to account for externalities in their pricing or product design strategies must now reframe the entire cost/value proposition of products and brands. An externality is a cost that occurs as a result of a commercial transaction that is not directly paid for at the time of purchase (the cost of waste disposal of an obsolete machine is one such externality).

Embracing the rationale for why companies should account for externalities is the right thing to do is a radical reframe of the role of the business for many. At this stage, companies also commit resources to developing strategic partnerships and fostering internal and external collaborations that bring additional expertise to bear on specific tasks.

At the Learning/Advocacy stage, companies are beginning to hit their stride in sustainability and are thinking about their businesses in fundamentally different ways than they did at the beginning of the journey. Sustainability is not something they “do,” it’s part of their core identity. As a result, marketers are often engaged in processes to rebrand and reposition the firm and its offerings in light of this full commitment. Additionally, companies are increasingly seen and act as thought leaders in their industries – advocating for sustainability practices, and sharing knowledge about their experiences.  Creating open standards and sharing expertise, rather than protecting company secrets for competitive advantage, is one of the adaptive challenges  of this stage.

Arriving at Transformed Marketing

At the Deepen, Sustain and Learning/Advocacy stages, we see an acceleration of change that results concurrently in transformed marketing. Changes that took place prior to these stages were necessary precursors to the adoption of transformed marketing. These changes raise the three key issues we previously outlined in The Transformation of Marketing:

Embracing a Systems Perspective – Companies began to embrace a systems perspective at the Deepen stage. An emerging web of relations and interconnections – in customers and markets, in the dynamics between community groups and strategic partners – continues to unfold for them as they gain experience.

Creating Social Good – By this stage, sustainability is less about something the firm does to make money, and has become more a way of life. The intrinsic value of building social good into the purpose and mission of the organization has become self-evident.

Living the Brand – The alignment of values, strategies and operational practices has advanced much more deeply, and as a result the company’s brand and image has authenticity and integrity. Trust is often a core brand value, and the company’s promotional practices are measured against that value.

At this stage of engagement, the coercive, intrusive, unethical and wasteful practices that undermine marketing have been eliminated by engagement with the values of sustainability. Additionally companies have cultivated relationships with stakeholders that allow for timely feedback on whether company practices are compromising brand promises or shared values. This feedback allows the company to self-correct more quickly and restore balance and integrity to its marketing practices.

The Road Less Travelled

The current business and political interest in sustainability makes this path toward the transformation of marketing likely the road more travelled.  Some companies that currently practice high-integrity marketing did not get there via sustainability, but rather through an ethic of care for all people they touch in their day to day interactions.  As I wrote in The Transformation of Marketing “we are fortunate in this time that research… 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. “

As always, we invite your comments, experiences and stories. Please write to us.

See the related article: Fulfilling Sustainability’s Potential: Growing the Top Line – about the role of marketing in creative strategic sustainability innovation.

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.