Five Lessons for the Leader of Tomorrow: Thoughts from “Good for Business”

I recently read one of the most thought-provoking business books of 2009, Good for Business: The Rise of the Conscious Corporation, and believe there is much to be learned from its insight.

The world is rapidly changing and those companies that recognize how and why will have a better chance to excel in the future. Consumers, prospective employees, investors, and governing bodies all have higher expectations of companies than they did in the past.

Good for Business lays out 4 cornerstones for successful businesses of the future- (1) respect for consumers' power,(2) a people-centered culture, (3) having a purpose beyond profit  and (4) a sustainable approach to business. 

Let’s briefly consider each of these cornerstones, beginning with respect for consumer’s power.  If you’re reading this, chances are you are well aware of the increased power of consumers as a result of the information age.  Consumer’s use the internet to form opinions, research purchases, and share experiences regarding brands and companies.  Its amazing the great divide between companies that understand and appreciate consumers’ increased power, and those that don’t.  

A perfect example of one who didn’t understand the new world is the youtube video “United Breaks Guitars”.  A United passenger witnessed baggage handlers mishandling his guitar, but despite trying for a year, he was unable to get the company to cover his damages.  The following video has been viewed by 6 million people on Youtube at the time of this writing and it's producers are already well into their third song about the incident.

Moving on to (2), most companies would claim to have a people-centered culture, but for many this is just lip service.  Hierarchical, command and control companies that try to make every decision in the corner office are going the way of the dinosaur.  These top down companies often have trouble developing future generations of leaders as when every decision is made at the top, people never learn to lead.  In addition, the authors of Good for Business rightly point out that there is a generational shift taking place, with millenials bringing a different set of expectations to the workplace.  Millenials have grown up in the digital age, have less patience for hierarchical organizations, and will not hesitate to move on to new opportunities if they are not getting their needs met.

Companies that (3) “have a purpose beyond profit” tend to have fiercely loyal consumers, motivated employees, and positive reputations.  The authors provide numerous examples of companies that live this value including Google, Whole Foods, and Green Mountain coffee.

Finally, the authors provide some interesting thoughts on (4) “a sustainable approach to business”.  Clearly, managing the impact a company has on the environment is the right thing to do for the planet and for future generations.  Interestingly, its also what your consumers and employees expect.  A Euro RSCG 2008 study showed that 79 percent of people purchase environmentally friendly products and a 2007 Net Impact study showed 81 percent of MBA students thought businesses should work to improve society.

Good for Business is loaded with data, real world examples, and case studies which persuasively support the authors’ thesis. Written in a conversational, enjoyable to read style, I highly recommend it.

Five Key Takeaways for Leaders

Here are some final takeaways for leaders:

1. Leaders must be aware of societal shifts which will change the business environment, and proactively plan to address them.
2. Embrace the fact that consumers’ power has increased dramatically and work harder than ever to exceed their expectations and build an authentic relationship with them.
3. You must equip and empower employees to evangelize the corporate brand; the old approach of managing all communication from the ivory tower doesn’t work any longer.
4. More than ever, creating an environment employees can believe in and rally around, leads to an engaged work force.  It can’t just be lip service- people will see right through it.
5. Corporations cannot ignore their impact on the environment- employees and consumers will no longer let them.

Are Brand Marketers Facing a Perfect Storm When It Comes to Private Label?

There’s no denying that private label continues to grow. In fact, Nielsen 52 week data thru July 11, 2009 shows that private label is up +7.4% across the Food, Drug, and Mass Merchandiser channels, with an average share of 16.9%. But why is that?

We all know it’s a tough economy, with consumers eating at home more often in an effort to save money. So when the economy improves, we should expect to see private label shares return to historical levels, right? Well, not exactly. Consider the following: 

• Private label shares in the U.S. have historically been well below those of Europe and Canada, and even with the recent share increase in the U.S., that gap remains.
• The “social embarrassment” associated with buying private label appears to have disappeared recently. Consumers used to “hide” private label products in recipes, while trying to avoid letting others know they use them. That is no longer the case. This is part of a larger overall trend going on in our country today where being thrifty and seeking simplicity is now seen as a good thing, and is being embraced by the masses.
• The quality gap between private label and national brands is narrowing. This is dangerous for brands, as once consumers try a private label product, and determine there is minimal difference from the national brand, they become less willing to pay the premium that brands are used to commanding.
• In today’s hypercompetitive, slow growth marketplace, many retailers share a common strategy of actively seeking to grow their private label businesses, as they are typically able to earn higher margins from private label versus national brands.
• The line between private label and national brands is blurring. Well managed private label products are becoming “brands” to consumers. Well designed offerings like Safeway’s O Organic and Eating Right lines, as well as Wal Mart’s Parents Choice products, are often viewed by consumers as brands.
• Departing from historical practices, retailers are beginning to broadly advertise their private label products beyond their weekly circular, with Wal Mart’s Great Value brand television campaign being a prime example.

Frightening, isn’t it? So what can brand companies do to stay competitive in this new reality?

1. First, continue to invest in brand equity, being sure to build an authentic relationship with your target consumers while stressing your brand’s point of difference.
2. Second, innovate, innovate, innovate. Staying ahead of private label products (and other branded competitors for that matter) gives your consumer a reason to pay a premium and maintain a relationship with your brand.
3. Understand how much your brand interacts with private label. Studies have shown that premium brands, with strong brand equity, often have less switching with private label products than second tier brands. This is important as you can then sell the retailer on how your brand attracts a different shopper and helps maximize the category closure rate for the retailer.
4. Understand and manage the price gap. In most categories, consumers are still willing to pay more for national brands versus private label. Where brands get into trouble is when they try to command a larger premium than the consumer thinks the national brand is worth.

Next time we’ll look at whether it makes sense for branded manufacturers to be in the private label business. Thanks for stopping by, and as always, I’d welcome your comments.

Refocusing On Marketing & Leadership Principles

Marketing and Leadership are topics that I have tremendous passion for.  I have been extremely fortunate in my career to work for some fabulous leaders and teachers, for some great companies, and on some iconic brands. Here are a few examples of businesses I’ve had the good fortune to help shape:

The inspiration behind this blog is to give back—to share what I have learned over the years, to throw out observations and ideas, and to challenge convention. It is my hope that this will lead to debate, and to growth. Philosophically, I believe each day we are either getting better—growing and learning—or we are getting worse, falling behind—its simply not possible to stay the same.

The business world is at an incredibly interesting time. First the economic reality we have all had to face:

• Entire industries like banking and auto manufacturing have been turned upside down
• Unemployment is at a peak
• The stock market has become extremely volatile with several hundred point swings becoming commonplace and retirement nest eggs have been diminished
• Discretionary income has declined as taxes and health care costs continue to rise and wage freezes/pay cuts become common- meaning consumers have less dollars to spend at retail

In addition, the consumers who drive companies’ economic engines have also evolved:

• Consumer segments are becoming much more diverse in terms of ethnicity, age, interests, attitudes, and behavior.
• How we interact has changed dramatically—social media and texting have replaced many face to face conversations
• Technology has enabled extraordinary availability of information (both accurate and not so accurate), which has changed the way consumers make decisions.

While these unprecedented times call for some changes in how companies behave, the core leadership and marketing principles of successful companies should not change. Here are some of the most important marketing principles (we’ll save leadership principles for a later post):

• Understanding your consumer and what motivates them
• Building brand equity by creating an authentic relationship with your consumers
• Always act ethically, and transparently with your consumers (and all your stakeholders)
• Providing true value
• Continue to innovate to meet consumers wants and needs
• Resist the urge to cut marketing spending dramatically; instead focus on maximizing return on your marketing investment

In the coming weeks, I’ll delve deeper into these principles, as well as sharing thoughts on effective leadership. Thanks very much for stopping by, and please let me know what you think.