Listening: A Strategy and Change Blog | Hosfeld & Associates

“To listen is to lean in, softly, with a willingness to be changed by what we hear.”

Mark Nepo

By Kathleen Hosfeld

Increasingly strategy must be about dialogue. In a recent article about the changing nature of strategy and marketing  in the “Twenty-Tweens” (our current age),  I described three different forms of communication – information sharing, persuasion and dialogue. Information sharing and persuasion are the two forms most people associate with marketing. But the nature of business, the demands of customers and stakeholders are quickly outstripping the capacity of information sharing and persuasion alone to respond.

What do we mean by dialogue? I’ve said that it’s the type of conversation where two or more parties bring together information out of which something new is created.

Poet David Whyte has talked about this type of communication in terms of what it means to be a leader today. In a video on his website he talks about the conversational nature of reality:

“The conversational nature of reality has to do with the fact that whatever you want to happen will not happen. A *version* of it will happen. Some aspects of it will happen. You will be surprised also and quite often gladdened that what you wanted to happen in the beginning actually didn’t happen and something else occurred. Also it’s true that whatever society, or life or your partner or your children want from you will also not happen. They also will have to join the conversation.”

Whyte’s speaking engagements with companies on the conversational nature of reality have to do with what kind of leadership stance one can take in response to this dynamic. Who do we need to be as leaders to participate in the conversational nature of reality?

The same question faces organizations. What kind of stance do we need to take with our customers and partners in order to thrive in the conversational nature of reality? Many companies who have been early pioneers of collaboration and co-creation will say there’s tremendous potential return on investment from engaging in dialogue. Strategy– including communications, product innovation and more – is at its best in dynamic collaboration with customers and other stakeholders. To tap that potential we need to start from a place of strong core of identity and purpose, and then have the skills and tools to support dialogue as it scales through the organization.

The scale of dialogue takes place on a continuum of complexity. On the left side of the X axis we have dialogues one-to-one; on the right side we have dialogues one-to-thousands or even millions. On the left side of the continuum we rely on interpersonal skills and good facilitation of conversations to get to the shared creation. On the right side, we need technology platforms (crowd sourcing, social media and corporate social platforms) to support true two-way “conversation” on a mass scale.

All along the continuum, we need to be able to relax our grip on our own ideas and be open to what we can “create together.” In his video, Whyte takes issue with what he calls the “strategic” approach, by which I think he means predetermining a set of actions and getting too attached to them in ways that ignore the conversational nature of reality. I would say that the type of strategy – marketing and organizational — that actually works today is one that takes the conversational nature of reality into account. It is not static. It is not a fixed plan. Rather it’s a framework that includes a strong purpose and identity and that creates a container – much like a greenhouse – where the seeds sown in dialogue can take root and grow.

A decade after Margaret Wheatley’s landmark book, what have we learned from biology, chemistry and physics about purpose and strategy

By Kathleen Hosfeld
As we approached the year 2000, Margaret Wheatley published an updated and revised edition of “Leadership and the New Science,” in which she explored themes from contemporary science and their implications for organizational life.

She wrote in a time when economic volatility seemed to be accelerating, and organizational life felt more and more chaotic and uncontrollable. How can we achieve a new sense of order in organizational life, she asked, without actual control over the infinite variables that threaten to upset the status quo every day?

Wheatley’s book never strayed into advice about management practice; but she suggested two things were essential for organizations to adapt to changing conditions and to thrive over time: a “clear center” and freely flowing communication.  My interpretation of her “clear center” is a clear and compelling purpose that draws and holds the parts of the organization together.

A decade later, our experience of economic reality continues to be volatile. Yet, the dynamics of the ordered universe continue to suggest forms and patterns that help organizations hold together in times of difficulty and thrive in times of abundance.

Purpose Has Changed
The idea of the clear center – a purpose – has continued to evolve. In 1999, if you’d asked about a company’s purpose the response would have been “to make a profit.” While that’s still often the case, an increasing number of firms see their purpose as a statement of how they would like to make the world a better place. They see their purpose as something that gives meaning to their work, and can actually drive better financial performance.

Purpose is also the foundation of strategy. Purpose and strategy working together are less a static plan than a framework of identity that allows a company to renew itself over time. Strategy adapts to changing conditions; purpose is what gives a firm internal continuity over time.  This is like what biologists called autopoiesis – the ability of a system to renew or regenerate over time.

Business Relationships Have Changed
While this sounds like a lot of self-focused organizational naval gazing, Wheatley also points out that organisms (and organizations) “survive only as we learn how to participate in a web of relationships.”  This points to two other patterns in the ordered universe, that of differentiation and of interconnection, visible in flora, fauna, and star systems. We understand ourselves in comparison with others, those we serve, those with whom we partner and those with whom we compete. This too, is an area where perceptions have changed. It is much more common today to hear executives speak about stakeholders and community partners as integral to their enterprise and its success.

Communication Has Changed
One of the things that has changed significantly since 1999 is the proliferation of different tools for two-way communication that foster evolution, adaptation and renewal.  Social media, crowd-sourcing, and other collaborative innovation technology platforms all have the potential to feed adaptive change. These interactive communication tools create the potential for significantly more communication inside the organization, as well as between the organization and its external partners.

Change Has Changed
Wheatley’s new science view focuses on organizational change resulting from external stimulus. Yet, another impetus of change comes from within. It is not the sun, rain and soil that force an acorn to become a tree.  The acorn is a system whose purpose is to become a tree. It works together with the sun, rain and soil to become a tree. So, too, in organizations, purpose serves as the platform for strategy to respond to and work with external stimulus to unleash organizational potential.  Strategy design is like mapping the organizational genome, discovering what the organization is designed to become.

Strategy Has Changed
Strategy has moved from a fixed set of decisions about specific responses to the market, to a self-organizing capacity to respond relatively quickly to market opportunities in service of purpose.  One of the fallacies of early thinking about so-called “self-organizing” in organizations was that it just happened.  Like anything else in organizational life, we’ve learned that it takes intention and attention.  In the case of strategy design this can be a fairly robust exercise in both right brain contemplation and left-brain analysis. The point is it’s not all SWOT Analyses and Action Steps.

Businesses and other organizations who are embracing these great patterns and lessons from the created world, are finding that they just simply work better. Not only do they represent a more sustainable model of enterprise, they offer more meaning and a greater sense of legacy as well.

By Kathleen Hosfeld

The Journal of Public Policy and Marketing released a special issue devoted to stakeholder marketing this month, which among other things, features an article by our academic partner Jenny Mish, professor of marketing at Notre Dame, with her colleague Debra Scammon.

As the journal has limited visibility with people in business and non-profits who engage with stakeholders, I’m reporting here on some of the ideas that have the most applicability to day to day practice.

What is Stakeholder Marketing?

Stakeholder marketing is an approach to marketing that examines the impact of marketing on stakeholders other than the customer.  Our short-hand description is that it is about “marketing with rather than marketing at stakeholders.” It seeks to partner and collaborate with stakeholders in the creation of value for the company, its customers and other stakeholders. One article in the special edition, “Stakeholder Marketing and the Organizational Field,” says that research demonstrates a strong business case for responding to stakeholder issues efficiently. Among the benefits are improved financial performance, greater stakeholder identification with the firm, and stronger stakeholder support.

The ideas from this special edition, combined with my own research, leave me with two observations on the current state of stakeholder marketing:

Best Practices Not Yet Clear

First, the primary obstacle to the adoption of stakeholder marketing it that it does not lend itself to tactical considerations as easily as green marketing, social media marketing, relationship marketing or any other similar approaches. These other practices often comprise a set of tools and tactical strategies that can captured and shared. So far, stakeholder marketing has not been reduced to a checklist of best practices. These articles, rather, describe an intention. One essay suggests that stakeholder orientation is best represented in a definition of marketing management. As Jenny’s article indicates, stakeholder marketing begins with a set of principles rooted in values, which then inform the culture of the firm, which then informs marketing practice.

Jenny’s article actually goes farthest toward identifying practices that show up in a stakeholder oriented approach to marketing. Among them:

• Approaching promotion and sales from the perspective of educating consumers about their choices rather than persuading them or seeking to control their behavior in favor of the firm’s objectives.
• Engaging customers as partners in creating value for other stakeholders
• Giving away innovations and market intelligence in service of improving the overall well being of the industry or market.

Marketers alone are not organizationally empowered to implement these practices.  More so than other marketing approaches, stakeholder practices must be supported from the top and must be coordinated across functional boundaries throughout the company. This leads us back to the role of marketing management as key in implementing stakeholder marketing.

How is Stakeholder Marketing Different From Stakeholder Engagement?

The second takeaway is that this edition does not yet answer the question “How is stakeholder marketing different from stakeholder engagement?” To answer this will require comparing companies’ stakeholder engagement or Corporate Social Responsibility (CSR) programs with their marketing strategies, taking into account all aspects of the marketing mix: product/service, pricing, distribution/sales, and promotion. Where are the linkages, overlaps or gaps?

Over the last several months I have contacted a number of well-known companies that I perceive to be practicing aspects of stakeholder marketing. Unfortunately, they don’t recognize their actions as such. They are more inclined to say that their CSR programs have elements of customer engagement. Even Timberland, whose stakeholder initiatives have been integrated into aspects of marketing and promotion, declines to call what they do stakeholder marketing.

It may well be that in many companies a stakeholder orientation in marketing will come from gradual encroachment of CSR initiatives.  As long as companies reinforce short-term thinking among marketers through mandates on measurement and quarterly financial goals, marketers will understandably resist embracing stakeholder methods which are often long-term in nature and difficult to measure – even though enhanced financial performance may be the ultimate outcome.

In the following series of articles, I’ve taken some of the topics raised by the authors in this special edition and provided brief summaries of findings that I feel are the most practical for those who manage marketers or have strategic oversight on a firm’s marketing.

Evolution of the Marketing Orientation – Researchers propose that stakeholder orientation is the next evolution in what began as a product orientation and evolved next to a market orientation.

Stakeholder Practices of Triple Bottom Line Firms – What does stakeholder marketing look like? Exemplary Triple Bottom Line firms provide the most insight and examples.

Like it or Not: Dragging Companies into the Stakeholder Perspective — Market events often trigger stakeholder activism that forces companies to shift from stakeholder management to stakeholder engagement.

Social Networking Taps the Creative Potential of the Stakeholder System — Social media marketing technology gives companies ways to manage stakeholder ideas and input.

Copies of the Journal of Public Policy and Marketing are available from the American Marketing Association. Purchase requires a subscription, which for individuals costs $90. The Journal publishes twice a year. Digital versions are available, but only to subscribers. Additional Information is available here .

If you are interested in integrating stakeholder strategies into your own marketing programs or strengthening stakeholder relationships in other ways, please contact us.

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This series of articles is dedicated to my beloved friend Coffee, with whose help they were written.

This article is one in a series of reports about the Spring 2010 Journal of Public Policy and Marketing special edition on Stakeholder Marketing. See an introduction to and a summary of our coverage of this edition here.

By Kathleen Hosfeld

In an article called “The New Marketing Myopia,” authors N. Craig Smith, Minette E. Drumwright, and Mary C. Gentile suggest that a stakeholder perspective is the next step in a progression that began with “product orientation” and evolved to “market orientation.” Building on the insights of Theodore Levitt’s landmark essay “Marketing Myopia,” originally published in 1960 in Harvard Business Review, the authors say that a stakeholders orientation in marketing will help prevent companies from relying too heavily on products or services that may come under regulatory or other scrutiny, or fall out of step with mainstream values.  Another article in the Journal’s special edition, “From Market Orientation to Stakeholder Orientation,” by O.C. Ferrell, Tracy L Gonzalez-Padron, G. Tomas M. Hult, and Isabelle Maignan, further develops the this idea.

A product orientation is internally focused on selling what one can/wants to make. A market orientation shifts to an external assessment of what customers need/want, and what competitors provide. A stakeholder orientation would also be externally focused, including other voices beyond customers and competitors, those advocating for longer-term, ethical, social, environmental or cultural issues.

The New Marketing Myopia article provides examples of food manufacturers and retailers who trade on the short-term desires of children for junk and fast food, and US automakers catering to the desire for gas-guzzling SUVs while disregarding signs of increasing regulatory pressure for more fuel-efficient vehicles. Stakeholders have lobbied both industries for years.  Automakers in particular have paid a price for ignoring stakeholder concerns.

The authors make the point that a market orientation, because it looks outward, has the potential to more easily evolve into a stakeholder perspective. The chief difference is that market orientation tends to ultimately prioritize customers and competitors over other stakeholders, whereas stakeholder orientation seeks to manage to all stakeholder interests simultaneously.

The original “Marketing Myopia” offered inspirational examples of how a market orientation expanded possibilities for long-term organizational evolution – reframing the core business from specific products which may only have a market for a decade or two to a customer need that might be reinterpreted over many decades.  It expanded trains to transportation, or silent films to film and video entertainment.

The authors suggest that stakeholder orientation can help companies “develop foresight regarding the markets of the future.” However, they provide no examples of how companies have thrived by doing so. Rather the stakeholder orientation as described here serves as a constraint – what one should not or cannot do – rather than something that broadens strategic options.  This does an injustice, I believe, to the stakeholder concept, which by way of its expanded systems view and the latent creativity present in the stakeholder system itself should similarly explode strategic options.

I wanted the authors, particularly of the New Marketing Myopia article, to cite examples of the generativity fostered by the stakeholder perspective. In some situations the stakeholder perspective might offer an expanded view of customer needs—from junk food to youth nutrition, or from SUVs to transportation solutions.  In others, it might show how companies and customers can create new benefit for other stakeholders while enhancing value creation for themselves. Or, it may simply mean meeting the same customer need but from within a business model or operational system that has been redesigned to respond to issues of ethics and sustainability.

Significant change is motivated by a compelling future.  I believe there is a compelling business case for adopting a stakeholder orientation in marketing. The authors of both these articles have not made that case.

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.

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.

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.

Organizations Can Experience the Stress of Change When Implementing New Branding or Marketing Strategies

The dynamics of change are challenging for any organization.  Whether reacting to change or initiating change, the ambiguity and fear of the unknown that go with change create anxiety.  It’s made worse when leaders don’t acknowledge that the experience of change is as important to manage as the actual mechanics of doing business differently. The change doesn’t have to be a merger, down-sizing or process engineering to have significant impact. It can be as simple as creating a new marketing program.

In my work helping clients to explore, identify and implement new marketing strategies I’ve seen the effects of change in a variety of circumstances:

• Addressing declining revenue in a down market
• Implementing a new marketing plan during the transition of senior leadership
• Adopting a new brand strategy as the CEO made unannounced plans to leave
• Developing a new strategic direction when an artistic director and an executive director were fighting for control of an arts non-profit

The lessons that are emerging from these and other experiences reinforce a number of best practices of change management. Emotionally-intelligent and systems-oriented practices help carry organizations more successfully through change.

See the Whole System – A systems perspective is one that recognizes that our current situation is the result of the interaction of multiple elements. There are many lenses through which to see and define the elements of a system. One, the integral model, suggests that there are subjective and objective aspects of human systems. Objective elements are those that can be demonstrated and observed. Subjective elements are thoughts, beliefs and feelings.  Many organizations seek to drive change by attending only to the objective elements. Increasingly however, they are finding that success comes from attending to the subjective ideas, beliefs, passions and perspectives taken by individuals and shared culturally. Attending to those subjective areas – the “soft” stuff – means taking care of the emotional side of change.

William Bridges is known for his simple but useful model that highlights the emotional challenges of change. Organizations beginning a change start with an Ending. From there they move into a Neutral Zone where there is an intentional effort to move to a new end goal. Arrival at that end goal constitutes a New Beginning.

For organizations or individuals who have had change forced upon them, the first phase, Endings, is a phase of grief and loss. Time must be spent at this stage of change to recognize what is ending, and notice what is not ending.  For those who are initiating the change, there may be less unwanted loss, but something must be given up in order to move forward. As painful as this time can be, the next phase, the Neutral Zone, can be even more challenging. In the Neutral Zone, we enter the unknown, a time of new learning, where risks must be taken to find solutions that take the organization toward its goal.

Acknowledge and Mitigate Anxiety — Organizations facing the unknown experience anxiety. The members in these organizations act out their anxiety in a variety of ways. Finger-pointing, blame-shifting, detachment, passive aggression, aggression, and scapegoating are among the behaviors that show up in the Neutral Zone. Trust, or lack of trust, can be a significant factor in change. Many are suspicious of who is behind the change and who will benefit the most. A lack of clear leadership will bring out aggression as individuals seek to impose a sense of order. Perhaps most important to notice is a tendency to personalize the anxiety of change and make friction or problems experienced in the change process a particular individual’s fault.

A variety of techniques can be used to address these behaviors if they arise during the implementation of a new marketing strategy or program. Perhaps the most important step to mitigate anxiety is openly acknowledging it and providing safe places for that anxiety to be expressed.

Leadership Sets the Tone – How is the top leader (or leaders) in the change reacting? Are they anxious? Are they risk-averse? Do they love learning new things and taking on new challenges? If the leader is anxious, the organization will be anxious. If the leader is not clear, his or her direct reports will be unclear. They will believe he or she has a plan and just isn’t telling them what it is. If the leader feels comfortable taking risks and making mistakes, he or she will make that okay for everyone else. That’s important because transformational and adaptive change means stepping into the unknown. Mistakes will be made. That’s how we learn the new way.

So, leaders in change must be aware of their own receptivity to change. Those that are anxious should find outside resources for support and not expect emotional reassurance from their employees. Those leaders who thrive in change need to be sensitive to those who are less comfortable and not label them as “the resistance.”   Frequent communication about the change, clarifying where the organization is in the change process, and providing hope for a positive outcome are some of the greatest gifts leaders can give in a transition.

A more detailed unpacking of the Bridges model will provide additional insights for organizations going through change. John Kotter’s model for leading change in organizations also provides a series of action steps leaders can use to address the points above as they plan and manage the change.

“After” Approaches Emphasize Stakeholders, Systems Perspective and “Third Way” Thinking

By Kathleen M. Hosfeld (with Jenny Mish)

Thousands of sustainability oriented startups are creating game-changing innovations in products, services, industry partnerships, supply chain management and more as they seek to integrate values of social justice and environmental stewardship into their business practices.

As startups, they represent one part of the new sustainability economy. The other side is existing “traditional” businesses seeking to integrate sustainability into both the culture and business processes at the same time. For the former group, the challenge is making it work without a roadmap. For the latter, it’s creating change in systems that seem to have worked “just fine” before sustainability came along.

Until recently, there hasn’t been much recognition of the role that marketing can play in furthering sustainability. Superficial promotional claims of green characteristics of products and services in the 1980s — what’s now known as “green washing” — actually created something of setback for the sustainability movement. Today, marketing functions – such as product design or supply chain transparency– that are critical to success may not – in some organizations – have been seen as part of marketing.

As more organizations have succeeded in integrating sustainability, marketing researchers and people in the field are noticing an emerging picture of what sustainability oriented marketing looks like.

Jenny Mish, a doctoral candidate in marketing at the University of Utah, and I saw the outlines of this emerging picture in data she gathered as a part of her doctoral work. She completed a study of “Exemplary Triple Bottom Line Companies,” in the summer of 2007. She identified several themes emerging as characteristic of marketing in sustainability oriented companies:

• They view their situations through a complex, systems perspective – highlighting interrelationships of components and stakeholders
• They take a long-term triple bottom line approach – finding third-way solutions instead of creating trade-offs between goals
• They engage a broad array of stakeholders
• They integrate full-cycle product (or service) costs into their understanding of what creates value and relevance for customers
• They emphasize relational, trust-based communications and sales approaches

Many of these organizations express these characteristics as “authenticity” – saying they reflect their values (“This is who we are”). Comparing Jenny’s interview data with my consulting experience in the field, we have created a series of polarity diagrams that demonstrate the contrast between marketing that is not at all sustainability oriented and marketing that fully embraces sustainability. This comparison begins to create some guidelines for those companies who want to practice sustainability oriented marketing. This offers a picture of what they might or should be striving for.

Marketing “Before” And “After” Sustainability

This series of three diagrams contrasts a simplistic, single-bottom line oriented approach to marketing with a complex, triple-bottom-line approach to sustainability marketing:

• It’s important to stress that the two ends of the spectrum do not exist in pure forms. The right side of each diagram actually represents a collage of sustainability oriented marketing“best practices.”
• We suspect that lower profitability on the left side is the result of a more limited marketing skill set that coincides with a simplistic approach.

Figure 1. Managerial Orientation

To make a transition to sustainability oriented marketing, the values and perspectives of sustainability must be reflected at the top. Although some studies show that sustainability efforts can “start from the middle,” – marketers need agreement and support from other managers to make sustainability a
priority. Without this, the pressure on marketers to drive only short-term sales targets will create either/or situations where marketers are forced to choose between profit and sustainability goals. Figure 1 contrasts the managerial orientation of the two ends of the spectrum.

Figure 2. Relationships with Stakeholders

What we see in organizations that make this transition is that at some point the expectation of the marketing function flips. The extreme polarity on the left represents marketing as strictly the job of “selling.” (Again it’s important to stress that the two ends of the spectrum are not descriptions of actual businesses, but rather extreme points of view.) At some point, exemplary organizations pursuing a triple bottom line demonstrate a perspective that marketing is the stewardship of relationships in the context of assumed reciprocity. They certainly don’t remove the sales imperative from the table. However,marketing is charged with accomplishing the goals of the organization for sales, profit and mission by providing superior benefit and relevance to not just customers alone but also to other stakeholders.

Figure 2 depicts the key relationships of which marketers become stewards in a sustainability oriented setting.

Figure 3. How Stakeholder Relationships are Stewarded

The final figure demonstrates how various aspects of marketing practice – from budgeting to research to pricing to promotion – change in character when the purpose of marketing shifts from “selling stuff” to “stewarding relationships.”

What we notice in this chart is that a much higher degree of marketing sophistication is required to practice marketing from a stewardship perspective. For example, whereas many organizations do not have a defined approach to pricing – for example, they price intuitively based on what the market will
bear – sustainability oriented organizations must develop the capacity to measure the full cycle cost of a product or service and base their pricing accordingly.

The approach to market intelligence or customer research also changes. On the left, consumers are studied so that their needs can be addressed in sales and promotion. Sustainability oriented marketers, on the other hand, seek to foster ongoing dialogue with customers and other stakeholders. It’s considered a continuous conversation, where even “co-creation” may take place when that is valuable on both sides.

Another characteristic that was noted from Jenny’s study is that in sustainability oriented marketing, marketing functions and expertise are dispersed throughout the organization. Marketing – or rather stewardship of stakeholder relationships – is “everyone’s job.” It’s important to note that many companies who haven’t consciously adopted sustainability principles yet practice a high degree of ethics and have high standards for authenticity and trust in customer and other stakeholder relationships. We sense that these companies are well placed on the continuum toward the right hand side of the polarity diagrams even if the ideas of social justice and environmental stewardship are not yet part of their corporate consciousness.

What Does All This Mean?

For those companies who are already embracing sustainability, this comparison of “before” and “after” may identify new areas to deepen their practice. For those who are just getting started, leaders in organizations may want to take note of the following:

• Marketers need to be supported in integrating sustainability and its values into their practices. They may need to be challenged to hold financial, social and environmental goals simultaneously. Or they may need assurance from the top that the company is serious about measuring success by all three.
• Marketers may also need to be challenged to think and act from a systems perspective. They need to be supported and trained to look for “third way” solutions rather than seeing multiple bottom lines as areas for trade-offs. In the end this may pay off in innovation. The ability to hold multiple objectives simultaneously and search for the “third way” has led, in the past, to new products and services, as well as more efficient manufacturing and delivery systems.
• The overall marketing skill of the organization must be enhanced. Marketers should receive professional development in areas where they may lack experience. A sense of “stewardship of relationships” should be fostered in the company as a whole so that sustainability oriented marketing becomes “everyone’s job.”

A “printer friendly” version of this article, with larger graphics, is available here.

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.