Branding 4.0 For The 4th Industrial Revolution

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Branding 4.0 For The 4th Industrial Revolution

In August 2019, 181 of the most powerful CEOs in the world, representing corporate giants such as JP Morgan Chase, Amazon, and Apple, made an extraordinary commitment. This commitment is so revolutionary that fully executed it will impact every facet of corporate America, from finance to governance, legal to investments, and performance to ownership. It will impact regulation, reputation, and relationships. And it will impact you.

The Commitment

These 181 CEOs committed to lead their companies for the benefit of all stakeholders.

The statement is so simple; it is easy to overlook its profound impact.

What It Means

In his 1962 book, Capitalism and Freedom, economist Milton Friedman declared:

“There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

By the 1970s, when Freidman’s article in The New York Times, “The Social Responsibility of Business is to Increase its Profits,” was published, Wall Street was listening. Profit was not only the single most important purpose of business, it also became the only purpose that most CEOs pursued, the only measure of performance, and the justification for nearly any action they took.

This single-pointed focus gave the United States the longest period of economic prosperity on record and the largest economy in the world.

But it also gave us:

With this statement, these CEOs are acknowledging the impact their organizations have on all stakeholders – customers, employees, suppliers, communities, and shareholders – and linking the value they provide to these stakeholders to the success of their companies, our communities, and our country.

These 181 CEOs, and their influential organization, the Business Roundtable, are declaring they will no longer pursue profits over all else. Instead, while pursuing long-term value for shareholders, they will also:

  • Deliver value to customers
  • Invest in employees
  • Deal fairly and ethically with suppliers
  • Support the communities in which we work

With this commitment, corporations are signaling important shifts.

From… To…
Taking the customer for everything they have “leading the way in meeting or exceeding customer expectations.”
Paying employees as little as possible while constantly pushing for more output, production, and performance “compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.”
Relentlessly leaning on suppliers to provide more for less “serving as good partners to the other companies, large and small, that help us meet our missions.”
Using communities and environments as resources to be exploited, depleted, and consumed “respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.”

 

With these shifts, these CEOs have committed not only to the success of their corporations, but also to the success of our communities and the United States. While it is not necessarily new thinking — from Johnson & Johson’s 1943 credo to Patagonia’s longstanding mission to Unilever’s Paul Polman to P&G’s Jim Stengel — it is certainly the first time such leaders have gone on record to stand behind these beliefs. History will tell us whether it was a moment of authenticity, or a flash in the pan whose brief illumination faded all too quickly in the cut and thrust of a fast-moving, demanding global economy.

Why Now?

This commitment does not spring from a newfound sense of generosity. These powerful corporate leaders understand these stakeholders are critical to maintaining their organization’s reputation, harnessing innovation, cultivating loyal customers, attracting, retaining, and engaging critical workers, and growing brand value.

In the September 2019 issue of Fortune, the article ”America’s CEOs Seek a New Purpose for the Corporation,” by Alan Murray, suggests this all started with a speech Bill Gates gave in Davos in 2008:

…in his last year of full-time service at Microsoft, calling for a new “creative capitalism.” As Gates told the World Economic Forum, “the genius of capitalism” lies in its ability to “[harness] self-interest in helpful and sustainable ways.” But its benefits inevitably skew to those who can pay. “To provide rapid improvement for the poor,” he said, “we need a system that draws in innovators and businesses in a far better way … Such a system would have a twin mission: making profits and also improving lives for those who don’t fully benefit from market forces.”

But the Business Roundtable statement was over ten years later. So, clearly, other factors are driving this change.

Income Inequality

There is constant talk about the strong economy and low unemployment, but ask the person next to you at the coffee shop, and it is likely they are working multiple jobs and still struggling to meet their monthly expenses. The promise of “pursuing your passion” in the gig-economy is met with the reality and stress of inconsistent earnings and out-of-reach housing costs. Over the past 40 years, despite a strong and growing economy, pay growth has been nominal in the United States with purchasing power after adjusting for inflation nearly flat.

When this reality is viewed against the rise in income and wealth of the top one percent of America’s households, a movement is born: #IncomeInequality. Since 1979, the before-tax incomes of the top one percent of America’s households have increased nearly seven times faster than the bottom 20 percent incomes, according to CBO analysis.

And there is no end in sight for this trend. A recent analysis from the UK Institute for Fiscal Studies suggests that wages will still be below 2008 levels in 2021. People work hard, and companies make big profits, but workers don’t share in the wealth they help to create.

Wavering Support For Capitalism

While corporate leaders continued to ignore problems such as income inequality, voters in US elections and the UK’s Brexit referendum signaled that they are not willing to accept the status quo. Campaign themes focused on a supposed economic threat posed by outsiders and a need to “regain control,” whether of borders or economic forces. They also attacked so-called “elites.” Clearly, these themes resonated with voters.

If we look at the impact that shareholder value theory has had on corporate investment, we can see that the threat, rather than being some external force, is likely our current model of capitalism. Instead of investing in their workers, vendors, and communities as a way to ensure future growth and innovation, corporations have been putting money in the pockets of shareholders.

And millennials have had enough. Their parents promised if they would “work hard” and get a good education, they would be rewarded. Enter another movement: #okboomer. Their parents’ promises didn’t work out, and millennials are not accepting blame. The 2018 Deloitte millennial survey found that 63 percent of millennial workers believe the primary purpose of businesses should be “improving society” over “generating profits,” signaling strong support for a new form of capitalism.

And, it’s not just millennials. Over the last few years, Harvard Business School professor Michael Porter began pushing what he called “shared value” capitalism, and Whole Foods cofounder John Mackey propounded “conscious capitalism.” Salesforce CEO Marc Benioff wrote a book on “compassionate capitalism”; Lynn Forester de Rothschild, CEO of family investment company E.L. Rothschild, started organizing for “inclusive capitalism”; and the free-enterprise-championing Conference Board research group sounded a call for “sustaining capitalism.”

When you consider that only 55% of Americans are shareholders but 100% of Americans are consumers, it is easy to understand why so many Americans feel left out of the benefits of capitalism under shareholder value theory.

The Power Of The Individual

With the rise of social media, individual voices can turn into powerful movements within days or minutes. CEOs can no longer hide behind a logo in the comfort of their anonymity. Inconsistencies in the brand experience, failures of the brand promise, and corporate misdeeds are often first aired on social media.

Many corporations are proactively launching marketing campaigns aimed at showing their commitment to their stakeholders and the issues and causes that matter to them, and with good reason. In a global survey, 91 percent of consumers reported they were likely to switch to a brand that supports a good cause, given similar price and quality. However, any hint of brand misalignment with the cause can create backlash. Twitter will love it. Your brand will not.

The power of individual voices on social media means corporate executives are keenly aware of the importance of authenticity, transparency, and accountability.

Technology-Driven Uncertainty

It is estimated that up to 47 percent of US jobs face potential automation over the next 20 years, driven primarily by advances in Artificial Intelligence, cognitive computing, and automation of repetitive, rule-based tasks. Future of Work experts have said, “every job will change” because of AI and cognitive computing. The impact of these technologies on employment and jobs has created uncertainty. Workers are concerned about not only their continued employment, but also the unforeseen impacts, such as inherent bias and privacy creep. They worry about how to keep up with training and who will pay for it.

Climate Change

Whatever your views on climate change, the fact is climate events are more extreme, more frequent, and having a significant impact on corporations’ bottom lines. Because of this, companies are increasingly disclosing the specific financial impacts they could face as the planet warms, such as extreme weather that could disrupt supply chains or stricter climate regulations that could hurt the value of traditional energy investments.

An analysis by CDP of submission from 215 of the world’s 500 largest corporations found that these organizations potentially face roughly $1 trillion in costs related to climate change in the decades ahead unless they take proactive steps to prepare. By the company’s estimates, a majority of those financial risks could start to materialize in the next five years.

Ecosystems

In our digital economy, ecosystems play an increasingly important role in shaping consumer and brand behavior and determining desired outcomes. “An ecosystem is a community of interacting firms and individuals who co-evolve and tend to align themselves with the desired action set by one or more central companies” (McIntyre and Srinivasan 2017).

Of course, corporations have always valued long-term relationships with customers, suppliers, and partners; however, the network effects and switching costs associated with digital economy products make ecosystems significantly more important than they used to be. A frequently cited example is Nokia and its Symbian operating system losing the mobile phone war to Apple’s iOS and Google’s Android in large part because Nokia was not able to persuade a sufficient number of developers to build applications on its platform. Former Nokia CEO Stephen Elop stated in an email to employees:

“The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.”

Over the last 18 months, all of these factors have come together to bring into sharp focus the need for immediate action, and the 181 CEOs of the Business Roundtable stepped-up: the singular corporate focus on profits has been expanded to include providing value for all stakeholders.

What Is Next?

Many, perhaps informed by research by the British Academy’s Future of the Corporation program, cite a renewed focus on brand purpose – or the purpose of the corporation – as the way forward. And, of course, purpose is critically important. As Larry Fink, founder of BlackRock, describes, “Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders.”

However, purpose is a decidedly internal organizational notion. Culture, decision-making, and shareholder returns all belong to the corporation and its shareholders. While purpose is important, it is only part of the way forward.

One of the most unfortunate outcomes of this relentless focus on profits is the dehumanization of workers, suppliers, customers, and communities. We’ve been treating workers and suppliers as “assets” or “capital,” driving them to greater efficiency while seeking to reduce investments. And communities have been treated as resources to be exploited or obstacles to be overcome. It is a game of diminishing returns, especially with technology advances such as AI and machine learning. Workers and suppliers especially are weary of repetitive tasks, working for “the man,” and fear winning the race to the bottom. Communities are concerned about losing their unique culture and the impact of climate change on their local environments.

The notion of stakeholder value or benefit is not purely financial. For customers, it might be more about a sense of belonging. For example, in its early days, Airbnb organized host meet-ups, helping to develop a sense of community and drive growth. For employees, it may be less about getting a 10 percent pay increase and more about feeling a sense of esteem through meaningful work. And suppliers and ecosystem partners may value self-fulfillment through creative partnerships that result in innovation.

As brands accept responsibility for providing value, all expressions of value must be explored. From a customer’s experience with an employee to an employee’s sense of belonging and ability to find meaning in their work, value is particularly personal.

The Upshot For Brand, Marketing, And Communication Leaders

Little of this thinking may be novel or new to those who have been involved in the purpose-led brand and transformation world; look no further than EY’s 2013 move to “Building a better working world” as a barometer of how this thinking has left the fringe and entered the mainstream.

However, where once “Purpose” was seen as one of many potential brand positioning opportunities, you’d be hard-pressed today to find many organizations that haven’t planted their flag in this fertile soil in one way or another.

What is needed is an entirely new way of thinking about branding, one that is rooted in providing value to all stakeholders, in a way that is meaningful to each and recognizes the importance of human needs: belonging, esteem, and self-fulfillment.

We propose that this convergence of social, economic, political, and environmental factors demands a new way to look at brand architecture and integrated marketing communications that activates a brand inside the organization, with its key stakeholders, and its broader ecosystem.

Kevin Keohane has developed the Branding 4.0 Model, which has the benefit of bringing simplicity to this complexity while allowing many of these variables to be accommodated and addressed. It’s as simple as a three-circle Venn diagram — yet has already been successfully used by at least one organization to rethink and redefine how it takes its mission into the world for its people, its audiences, and its communities.

The diagram creates seven areas of focus – with the brand at the core, marketplace, culture, and ecosystem as distinct focus areas, but the critical areas where these areas overlap are taken into consideration. Adding a “filter ring” which we are short-handing to “inclusive capitalism” and you have a powerful way to distill the need for core focus and consistency for your brand, alongside a decision-making filter to ensure you are taking into account myriad factors that traditional brand architecture and segmentation approaches (including hypertargeting) don’t address.

By Catherine Hedden, with Kevin Keohane and Derrick Daye.

Action Steps

We have created a strategic workshop for the senior leadership teams of brands in all business categories and every stage of development along with a handbook and a business simulation game as part of a portfolio of practical tools to activate this 4th wave of Branding. Please email us for more.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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