Читать книгу Attractive Thinking - Chris Radford - Страница 8

Introduction

What is

Attractive Thinking

and why does it work?

How can Attractive Thinking help you?

What is the purpose of creating or running a business? ‘To make money’ might be the first thought that comes into our minds. There is no doubt that this features prominently in the minds of people in business and many customers and suppliers will assume the business exists to do that. But is that all there is to it?

‘Making a profit’ is a subject that preoccupies us as business people. We know that if we don’t make a profit, eventually we will not have a business. The Mars chocolate company mentions profit as a part of one of its five principles. The five principles are: Quality, Responsibility, Mutuality, Efficiency and Freedom. But the way they explain freedom is interesting:

FREEDOM: We need freedom to shape our future; we need profit to remain free.

This talks about the function of profit in the business. Profit is about retaining freedom to run the business in the way the family and the management wish to.

Many other people have argued that if a business only exists to make money then something is missing. Businesses are actually about people, customers, staff, shareholders, managers, suppliers. Whilst people need money and we are motivated by money that is not what really drives us. People are about people, their social relations, their dreams, their visions, family, bonds, society and nationality. When businesses ignore this then they do not perform as well as those who recognise it.

Jim Collins and Jerry Porras, in their 1994 classic Built to Last, examined the performance of two different types of businesses.¹ They identified firms that were guided by long-term aims and expressed vision and purpose and those managed for short-term profit and shareholder returns. They found that between 1926 and 1990 a group of ‘visionary’ companies – those guided by a purpose beyond making money – returned six times more to shareholders than explicitly profit-driven rivals.

In 2016 a team from Harvard Business Review Analytics and EY’s Beacon Institute conducted research amongst 431 senior executives and published a paper titled ‘The Business Case for Purpose’, which concluded that those companies able to harness the power of purpose to drive performance and profitability enjoy a distinct competitive advantage.²

‘Maximising shareholder value’ is another often-quoted soundbite. This was very fashionable in the 1980s in business circles. It is still a view that prevails. As recent as 2017 the Economist³ said that the goal of maximising shareholder value is ‘the biggest idea in business’. Today ‘shareholder value rules business’. The idea of maximising the value and the returns for the owners and investors in the business has an appealing logic. After all, the purpose of investment is to generate a return on the investment. This return arises either from an increased valuation of an asset such as share price, or the health of the balance sheet or the sales, revenue and profit. The original proponents of maximising shareholder value argued that this should be the goal of CEOs and the board. This ensures the aims of the CEO and board are aligned with the objectives and expectations of the shareholders.

But in the past 20 years the idea of maximising shareholder value as a goal of business has been increasingly attacked. This includes several high-profile CEOs:

• John Mackey, CEO of Whole Foods, condemned businesses that view their purpose as profit maximisation and treat all participants in the system as means to that end.⁴

• Marc Benioff, Chairman and CEO of Salesforce, declared that this still-pervasive business theory is ‘wrong. The business of business isn’t just about creating profits for shareholders – it’s also about improving the state of the world and driving stakeholder value.’⁵

• Alibaba CEO Jack Ma declared that customers are number one; employees are number two and shareholders are number three.⁶

• Paul Polman, CEO of Unilever, denounced ‘the cult of shareholder value’.⁷

• Larry Fink, the CEO of BlackRock, the world’s largest institutional investor, has written to all the CEOs of the S&P 500 and called on them to present long-term strategies. Companies are under-investing in innovation, skilled work-forces or essential capital expenditures.⁸

If we want to understand the arguments that these CEOs put forward, it is helpful to distinguish between means and ends. For Larry Fink, having a business purpose that goes beyond profit is the means to achieve long-term profitable growth and increase shareholder value. The argument runs that if a business focuses on maximising short-term shareholder value it will be less successful at doing this than a business that has a purpose and recognises it must invest in and reward all stakeholders (staff, suppliers, customers, shareholders). In other words, maximising shareholder value is held up as the primary aim of the business, but that the means to achieve that is to focus on a wider set of aims and ensure the business has a purpose that people can get behind.

For John Mackey of Whole Foods, the business purpose beyond profit is the means and the end. His business is all about bringing better food at fair prices and treating suppliers well. The profit and shareholder value are a by-product of that work.⁹

But whether they make purpose the means or the end, more CEOs now agree that having a purpose beyond profit is necessary to create competitive advantage and deliver long-term profitable growth and value to shareholders. This idea works because a business thrives by engaging with all its stakeholders including staff, suppliers, customers, shareholders and its relationship with the public at large.

In the Harvard Business Review Analytics and EY Beacon Institute study in 2016 over 80% of the executives interviewed agreed with the following statements:¹⁰

An organisation with shared purpose will have employee satisfaction.

I’m more likely to recommend a company with strong purpose to others.

Our business transformation efforts will have greater success if integrated with purpose.

An organisation that has shared purpose will be more successful in transformation efforts.

Purpose-driven firms deliver higher-quality products/services.

An organisation with shared purpose will have greater customer loyalty.

Marketers and CEOs have been swept up in the discussion of purpose and have tried to ‘borrow’ a purpose and attach it to their business. This can easily backfire if the purpose does not seem to have much to do with the company (Figure 0.1).

Figure 0.1 Source: Marketoonist.com

In 2018 Lush Cosmetic stores attached themselves to an emerging story about undercover police officers in the Metropolitan Police engaging in deceitful romantic liaisons. There was a public backlash as to why a store selling bath bombs was getting involved. Lush got profile and awareness by doing this, but it did seem unconnected to their brand.

Gillette launched a purpose campaign that was about men having respect for women. This came under criticism for the observation that Gillette did not entirely live up to this themselves, particularly for charging women higher prices for the same razors as used by men.

In 2017 Omar Rodríguez Vilá and Sundar Bharadwaj wrote in the Harvard Business Review about brands trying to adopt a social purpose that is only slightly related to their core business:¹¹

Managers often have the best intentions when trying to link their brands with a social need but choosing the right one can be difficult and risky and has long-term implications. Competing on social purpose requires managers to create value for all stakeholders—customers, the company, shareholders, and society at large—merging strategic acts of generosity with the diligent pursuit of brand goals.

So, some business leaders recognise that expressing a purpose that goes beyond profit and embraces customers, staff, suppliers and shareholders can also maximise long-term financial returns. More recently, creating and communicating a purpose beyond profit has almost become a fashionable pursuit amongst business leaders and marketers. Some businesses have come unstuck when they adopted a purpose that is not the core of what they do. Some businesses have also been criticised for focusing too much on social purpose and that this has been at the expense of short-term profits. Where does this leave us as business owners and leaders who want to attract more customers and create a sustainable long-term business? We like having a purpose in our business; we kind of know that business is about more than profit. But we also know that businesses are about profitable growth and creating shareholder value.

In this book you will get to discover an approach to brand building and business growth that I call Attractive Thinking. Attractive Thinking is a method to attract more customers, motivate more staff, collaborate with more suppliers and reward more shareholders. This approach resolves the questions about how business purpose, shareholder value, growth and profit are connected. It delivers a platform to create, build and grow our brands. It is built on the belief that our business will only really prosper if we embrace all the stakeholders. In particular, we must attract and embrace customers, shareholders, staff and suppliers. If we can attract and motivate more of each of these critical groups of people, then we will be more successful.

Creating a business purpose that works

The idea of business purpose has been around for a long time. Back in 1954, Peter Drucker chose to keep it simple and offered a simpler yet profound definition of business purpose: ‘to create a customer’. Drucker wrote:¹²

It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance – especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers ‘value’, is decisive.

This powerful thought seems to have been lost in the current debate around purpose, profit and shareholder value. Yet this simple definition underpins Attractive Thinking. For me, this simple idea resolves the issues raised in the debate around purpose and profit. This definition crystallises the most important thing that a business must focus on: The customer. Drucker’s definition connects several important themes in a business. The Attractive Thinking approach builds on this. The purpose of business is to solve a customer problem and address a need. When purpose is framed liked this, then it is apparent that our business purpose is our core activity, not a nice to do ‘add on’.

In Part I, I will examine research and evidence about how customers think and behave to understand why this works. In Part II, I will show a practical framework that will help ensure our business

• gets more customers so we can grow;

• delivers value for money so that people will come back for more;

• creates growth so we can survive and prosper;

• delivers a profit today, tomorrow, next year and beyond;

• manages costs so we deliver profitable growth;

• motivates the team to deliver more, innovate and drive productivity;

• makes this a fun place to work;

• attracts staff so we can do all the above.

Attractive Thinking drives a much better focus and much better decisions than just setting out to maximise shareholder value. Attractive Thinking helps you to take the idea that we exist to create a customer and translate that into a sustainable profitable business in both the short term and the long term.

The role of marketing and the CEO

The responsibility for driving a customer-first or customer-led agenda and setting out the purpose of the business rests firmly with the CEO. But often the CEO needs a team to support them in doing that. The Marketing Society in the UK asserts that this is the job of marketing. Marketing is not just there to produce the websites, the brochures, run the exhibitions and manage the advertising. In the most successful businesses, the marketing function sees itself in the role envisaged by Drucker:

to create a customer

The Marketing Society¹³ states that the job of marketers is ‘to create sustainable growth by understanding, anticipating and satisfying customer need’. This is the function of marketers, the CEO and business owner/managers. The CEO is the lead marketer in any business, he or she does have other jobs, but being lead marketer is one of them. And the Marketing Society then goes on to explain the task of the marketer and say that creating sustainable growth requires marketers and CEOs to focus on three things:

1 Define your future vision of how the organisation will succeed.

2 Engage and inspire the organisation to be customer led.

3 Deliver by creating value for customers.

Figure 0.2 from the Marketing Society explains how this works to create sustainable growth.¹⁴ This is quite different from how marketing is seen and talked about in many businesses. Marketing is often thought of as the function that does the advertising, produces the brochures, the website, runs the promotions and maybe handles any market research.

Figure 0.2 Source: The Marketing Society, June 2019

This definition makes marketing more central and fuses the role of the marketing function with the CEO. Marketers must ‘understand, anticipate and satisfy customer needs’. This underpins the Attractive Thinking approach.

However, there is some way to go to make this happen in all organisations. At the time of writing this chapter, Marketing Week¹⁵ published an article reporting on new research by Dentsu Aegis Network. They reported: ‘According to research by Dentsu Aegis, just 25% of UK marketers identify “leading disruptive innovation” as a core functional priority’. This suggests that only one-quarter of marketers agree with the Marketing Society view that marketing is not just about marketing communications but is responsible for creating value, creating growth and driving the customer agenda throughout the business.

Attractive Thinking believes it is important that the CEO and the marketers are not just charged with maximising sales and profits from what we make and sell today, but are also responsible for deciding what we produce, deliver and sell in the future. The Attractive Thinking principle is that to attract more customers, we must understand what they want now, anticipate what they will want in the future and then ensure we produce and deliver it.

What you will get from this book

You will learn about an Attractive Thinking approach that makes the job of creating a customer a lot easier.

In Part I we will explore why Attractive Thinking works. We look at why attracting more customers is better than extracting more profit from the customers we already have. We will explore fundamental principles that work for both consumer and B2B brands. This is split into three chapters.

In Chapter 1, we examine why we must always start with the customer and how to do this in our business and what might stop us. This begins with setting out that our business purpose is to solve a problem and address a need that our customers have.

In Chapter 2, we will look at how to understand customers, how market research can help us and where it does not help us, and when we need to find alternatives. We will study some universal rules of customer behaviour that must guide our brand strategy and marketing plans.

In Chapter 3, we will look at why it is so difficult to get this right and a few pitfalls where we might stumble and challenges we must overcome. This includes the role of unconscious biases, the influence of randomness and unexpected events, the hazards of trying to predict the future, and why we must be wary of common sense and conventional wisdom and instead look at science and empirical evidence.

This sets up the idea that we need to make our businesses ‘antifragile’. This means our business is not just robust but is also dynamic and able to thrive on unexpected shocks.

In Part II, we look at how to apply the Attractive Thinking method. This is a five-step process to create a brand that will attract more customers and not just extract profit from existing customers. We will avoid marketing jargon. Each step has a name and creates the answer to a question:

1 PINPOINT – Who are our customers and what are their problems?

2 POSITION – How can we solve their problems and stand out?

3 PERFECT – How do we create a product, service or message that delivers this?

4 PROMOTE – How do customers find out about it and where do they buy it?

5 PITCH – How do we engage our shareholders, board directors, colleagues and customers?

At the end you will have a brand strategy that everyone is convinced will work. Throughout this book, I want to work with you. I will adopt the approach that we are embarking on this voyage of discovery and planning together.