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Why Purpose-Led Brands are Winning with Consumers

There’s a new contract, and people expect companies they buy from to protect employees, society and the planet.

For years, companies told consumers what their brand stood for, shouting it from four-story billboards. Whether the company lived up to that purpose didn’t really matter – there wasn’t an easy way for consumers to see behind closed doors nor engage in dialogue. Then, technology transformed consumer expectations. Consumers demanded two-way interactions, constant sharing and ubiquitous connectivity. They were no longer willing to be talked at but rather wanted to be talked to. So, brands built long-term strategies around the voice of the consumer – ensuring their purpose and what they put into the market reflected what target consumers had told them. For a while, that was enough. But now, we are at another inflection point.

“Brands today must not only be vocal in tough conversations but also take action to push the causes they support forward.”

As the world, and more specifically, the United States grapples with the causes and effects of COVID-19, the #MeToo movement, Black Lives Matter, political unrest, climate change, the wealth gap, and more, brands are now being asked to take a stance. Brands today must not only be vocal in tough conversations but also take action to push the causes they support forward.

Human Values are at the Core of Purpose-Led Brands

The Business Roundtable, a non-profit association of CEOs from major U.S. companies, recently asserted that “each of our stakeholders is essential” – including customers, employees, suppliers, communities, and shareholders and “we commit to deliver value for all of them.”

And yet, this idea of shared value will not be enough moving forward. Shared value implies something insular – engaging with and providing value to those already inside a brand’s bubble. At Prophet, we believe brands need, at their core, to have the shared human values that many global societies are striving toward in the twenty-first century: freedom, equality, solidarity, tolerance, respect for nature, and shared responsibility.

A recent Prophet survey asked business leaders about how they define trust in times of crisis. Results demonstrate that consumers are at a tipping point – it is no longer acceptable for brands to only focus on shared value. Now successful brands must demonstrate a focus on these shared human values.

When asked in April, 58 percent of consumers said to earn or keep their trust, it was very-to-extremely important for a brand to offer a relevant set of beliefs and values. By June, this number had jumped to 69 percent. Consumers are no longer willing to trust brands that have fallen out of touch with society’s progress; in fact, 78 percent of consumers believe companies have a larger role to play in society than just looking after their self-interests. Employees feel similarly; in a McKinsey survey, employees said that contributing to society should be a top priority of their companies.

While a brand purpose is critical in providing a ‘North Star’ for an organization’s strategy and culture, it is not sufficient. Companies must ensure their purpose is broad-based and bold, not myopic or near-sighted. They must then authentically and holistically act against this purpose. Today, companies struggle to complete both, equally important, tasks. McKinsey’s study demonstrated that only 21 percent of purpose statements focus on contributing to society and only 42 percent of employees at US companies believe their company’s stated “purpose” had much effect.

Those that do not boldly demonstrate action related to their purpose are penalized– 53 percent of consumers who are disappointed with a brand’s words or actions on a societal issue complain about it, 47 percent walk away from the brand in frustration, and 17 percent never come back. On the other hand, those brands that demonstrate a continued focus through action are rewarded. Unilever’s “Sustainable Living” brands are growing 50 percent faster than the company’s other brands and delivering more than 60 percent of the company’s growth.

Four Ways to Rethink Brand Purpose

We believe brands that are willing to actively demonstrate their brand purpose can push society forward by:

  1. Defining a human value(s) they stand behind. Brands must consider the societal context in which they exist and the human needs present in this context; they must define which of these needs they are willing to support and push forward.
  2. Ensuring their brand purpose is based on that human value(s). Brands must use this understanding of societal context and human values to ensure their purpose encompasses them. Rather than focusing on what they believe they should deliver, companies must focus more holistically on what society needs them to deliver.
  3. Continuously messaging and providing action to demonstrate commitment to their purpose. Brands must put their purpose into action, continuously speaking out and delivering relevant products, services, experiences, charitable giving, campaigns and events to market the human value they are trying to push forward.
  4. Maintaining focus on this purpose internally. Business leaders must demonstrate to their employees and key stakeholders that a consistent focus on brand purpose is not only rewarded but required. Building an organization and culture around the brand purpose will empower employees to hold the organization accountable to its words.

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The wariness of brands to take action – whether because they fear losing profit or stickiness with target consumers – is misplaced. Brands that have a well-defined and bold purpose often attract and retain the best talent. In sum, brands that define a bold purpose and truly deliver on it don’t lose profitability, they gain it. Furthermore, brands concerned that their actions will alienate consumers forget that the shared human values their purpose was built on were those that were relevant to core, target consumers. Though brands that act on their purpose may lose business in the short-term, they bolster their relationship with their core consumers, leading to longer-term gains.

Brands that take these steps have a chance to not only win with consumers and grow faster than their competitors, but also positively influence society in a long-lasting way. Interested in learning more about how Prophet helps our clients create actionable purpose-led brands?

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Why a Transformation Management Office is the Secret to Accelerating Enterprise Transformation

Without a designated team to manage transformation, true change is close to impossible.

“Thanks for the tasty breakfast.”

– Your culture

The recent COVID-19 crisis has accelerated the need for companies to transform themselves. But the fundamental challenge remains: it’s hard to become something different than what you are today.

The reason transformation is hard – whether digital transformation or some other kind – is that companies inevitably run into significant cultural barriers where old mindsets, behaviors and a lack of skill eventually bring things to a halt. Hence, the famous adage attributed to Peter Drucker: “culture eats strategy for breakfast.”

So how can today’s organizations address the complex and amorphous barriers to the transformation that we call “culture” while keeping their breakfast? The answer is to establish an effective Transformation Management Office (TMO).

The Missing Piece of Your Transformation Puzzle

At Prophet, we believe the core failure of most approaches to transformation is that they are not holistic enough to ensure either speed or success. We developed our Human-Centered Transformation Model to help see the range of efforts and the necessary interconnections across the DNA, Body, Mind and Soul of the organization. For instance, failed transformations frequently overemphasize technological changes (Body) without buy-in from business stakeholders around how new technologies will enable the strategy (DNA). Or they focus on training up new skills (Mind), without considering the mindsets and cultural behaviors (Soul) that match will with skill, ensuring new capabilities are actually applied in the real world.

Even with a holistic approach, aligning new behaviors, new skills, and new processes also require new ways of making decisions. And this is – to put it plainly – extremely hard without a team devoted to addressing that challenge head-on. We believe a team must actively manage and align those efforts, otherwise, there will be no change and no true transformation. And in our experience, this team cannot live within the rules of the existing organizational structure.

Where Does That Piece Fit Best?

We believe there are two models for this kind of structure for transformation management – federated or centralized. Many companies have (by default) adopted a form of federated management, which assumes that individual business units or functions can be accountable for managing their own transformation as a subset of the whole (see Figure 1). The challenge with this assumption and the federated approach is that you end up with lots of disconnected local work. Most frequently, these local efforts set themselves achievable goals with lengthy timelines and result in very little transformation. Occasionally, companies also set up Program Management Offices, to coordinate communications and track progress. But adding a PMO frequently adds centralized bureaucracy that is divorced from business value – you might get more done, but with less business impact (see Figure 2). The challenge is that these companies are working backward: the federated model is a destination, but it’s not at all the place where you need to start.

Figure 1: Centralized vs. Federated Approaches to Transformation Management

Figure 2: PMO vs. TMO

Prophet’s experience managing transformations of all stripes leads us to believe that you must start with a centralized model. And our research over the last two years has validated that those companies who set up a TMO with a clear roadmap and rituals around decision-making can overcome cultural roadblocks as they emerge. In fact, in our estimation, too few respondents in our recent Catalysts in Action research have stood up a TMO yet. However, 100 percent of those who have reported that it has had a positive impact on their transformation. And a whopping 83 percent reported its impact as “very positive.”

The DNA, Body, Mind and Soul of an Ideal TMO

To be successful, a TMO needs to address cultural challenges holistically across the DNA, Body, Mind and Soul of the organization. A critical first step is strong DNA:

  1. A clear vision about how the DNA of the organization is changing. Who do you want or need to become?
  2. A specific timeframe for achieving that ambition. When do we want to achieve our goals?
  3. Real metrics to serve as signposts. How will we know we’re making appropriate progress?

A TMO must also have a strong Body – an operating model for its core processes and functions that covers five key domains:

  1. Goals & Investments – Defining the transformation, setting goals, and overseeing ongoing investments.
  2. Portfolio & Governance – Overseeing work intake, classification, prioritization and resourcing.
  3. Education & Mobilization – Supporting in-flight projects by enabling teams to improve how they deliver on their goals and assisting with roadblocks.
  4. Reporting & Forecasting – Reporting and actively providing visibility and accountability for the value being delivered.
  5. Change Management & Communications – Providing an organization-wide point of view and air traffic control for change impacts across portfolios.

An operating model for the TMO outlines clear processes for each of these five areas, as well as interaction models defining how key stakeholder groups work together. Done well, TMO processes are not an added layer of bureaucracy; they help streamline effort across a wide range of leaders, teams, and individuals, giving them the clarity they need to take unambiguous action each and every day.

As part of standing up a new TMO for a major US insurer, our team worked together with key leaders to develop a “TMO Handbook.” The Handbook codified specifically how and where the new TMO would integrate with existing business planning processes, but also helped leaders across the business understand how and where to plug in and contribute to decisions about the company’s transformation.

The skills and competencies – the Mind – of a great TMO core team include strong EQ and communication skills to provide visual, verbal and written demonstrations of empathy to stakeholders struggling with rapid change; strong process facilitation skills to apply an Appreciative Inquiry-driven approach to collective problem solving; and strong analytical skills to be able to manage and measure progress. In building its TMO, a US financial institution was intentional about selecting resources with strong EQ and communication skills to staff it, given the level of executive interaction the small TMO team would need to support its charter.

Finally, in their Soul the TMO team must adopt a product ownership mindset, viewing the enterprise as a whole, demonstrating the behaviors and rituals common with the best product managers, including creativity, design, an agile methodology, and data-driven decision making. In this context, their product is the organization. As one of the first steps in managing its transformation, a leading quick-serve restaurant-trained key leaders of transformational initiatives in Agile ways of working, defining the responsibilities, decision-making and behaviors for portfolio and project leadership roles.

The TMO Lifecycle

Ultimately, a TMO is not something that should last forever. Like the transformations they empower, TMOs have a natural end date. The TMO team should know they have a role to play for a period of time, but that all the new capabilities they create should ultimately migrate into other parts of the business. Over the course of its lifecycle, a TMO should eventually move from a centralized to a federated model so that business leaders can go back to managing their individual parts of the business with a shared enterprise mindset and a new set of global and local capabilities. And as with many things in transformation, “timing is everything.”

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Thinking about your own organization, consider where it stands in its own transformation journey – are you just getting started? Have you already made good progress? Or perhaps you’re well down the path to a transformed organization? If your organization is one of the 45 percent of companies who have already established a TMO, try to identify where it might be more effective across its DNA, Mind, Body and Soul. If not, consider where a TMO might be able to help accelerate progress with a more centralized approach.

If you’d like to establish an effective Transformation Management Office to propel your company forward at a new speed and instill a new culture of delivery then contact our expert team today. 

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Where Did the Watercooler Go? Keeping Your Culture Connected

Companies need to create virtual spaces that are casual, comfortable and safe.

Glug glug. The proverbial watercooler.

It’s where employees take a pause and engage in small talk. It’s where employees keep up to date on the latest developments. And it’s where many of the most innovative ideas first get floated. When employees can casually congregate at the watercooler, cafeteria or ping pong table, it breaks down formal barriers and encourages employees to bond with co-workers outside of their immediate working team. These personal connections not only build comradery but also enable trust and open communications, which are cornerstones to a healthy culture.

But with so many of us now working remotely, interactions with co-workers have become more transactional and largely only with those on our team or within our department or function. Save the occasional Zoom cocktail hour, serendipitous conversations are becoming virtually non-existent. A recent report found that virtual work now accounts for 62% of the workforce, and for many, work-from-home is here to stay. Although the world has adapted almost overnight to working remotely, organizations are now asking what impact this is having on their culture. Case in point: how can organizations recreate unplanned watercooler moments in a virtual work environment?

Creating the Right Environment

Remote work has forced us to think about new ways to support our people as they try to remain productive while feeling isolated and overwhelmed. Ensuring teams have the right digital tools, technology and access to the information they need to do their jobs are table stakes in virtual work. Preserving informal conversations and informal networking takes a bit more thought, especially without physical spaces like the coffee counter, lunchroom or Vinnie’s Pizzeria around the corner.

In a physical environment, the culture encourages watercooler moments through symbols, rituals and artifacts – naming the snack area, choosing unique furniture styles, and allowing personalization of meeting spaces. In a virtual environment, we have to be more overt about the watercooler moment to encourage organic interactions and fight the tendency to easily disconnect. Before looking at solutions to the problem, let’s define the qualities of a great watercooler moment:

  • It’s a safe space. Trust is pervasive to the experience. Employees need to feel they can ask questions, share ideas and be “wrong” without repercussion. Employees will avoid the company’s intranet for informal communications if it leaves a trail.
  • It’s casual and organic. Informal moments happen in the normal course of the day, on the way between tasks, or in scheduled breaks (i.e. lunch). It shouldn’t feel like another item on the “to-do” list.  Make it fun and easy to slip in and out of.
  • It’s acknowledged. While rarely explicit, unplanned interactions are acknowledged as essential to the culture. Successful leaders model desired behaviors by seeking out casual conversations, and encouraging their teams to do the same.
  • It’s iterative. Watercooler moments are just one step in a consensus-building process, that builds on and carries forward a continuing conversation. They don’t require hard inputs and don’t expect hard outcomes. It’s about the journey, not the destination.

“Personal connections not only build comradery but also enable trust and open communications, which are cornerstones to a healthy culture.”

Simple Ideas to Get Started

In some ways, virtual work has already begun to break down traditional organizational norms. Despite the lack of a corporate campus, decisions are being made and operations are proceeding, in some cases faster than ever before. The pandemic has created a rapid test-and-learn environment for new ways of working, and is a great opportunity to help your employees connect in new, more meaningful and personal ways despite the distance:

Leverage Technology:

  • Consider tools like the Slack app Donut that automate virtual coffee chats by pairing co-workers from different parts of the organization at regular intervals.
  • Encourage employees to stay logged into their virtual meeting apps (i.e. Zoom) during the workday and “drop in” for a quick conversation or brainstorm.
  • Conduct informal polls for favorite summer cocktails, recipes or outings; enable a comment feature to allow for additional interaction about the poll topic.
  • Create an #aboutme hashtag on the intranet where employees can share their hobbies, interests and passions and build affinity groups.

Create Collaboration Moments:

  • Form cross-functional working teams from different geographies, levels and skill sets to address social issues (i.e. community outreach, LGBQT, BLM).
  • Set up group chats on a messaging platform to discuss non-business topics like trending pop culture, parenting, fashion or music.
  • Host virtual brown-bag lunches to cook, share, eat and chat informally.

Have Fun:

  • Host a virtual concert where employees and their families can perform a song, play an instrument or do karaoke.
  • Encourage book or movie clubs where employees can share and discuss their latest Netflix binges.
  • Run a virtual game night where teams play a board game or on-line video game.

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While we are all working remotely these days, it doesn’t mean our watercoolers need to run dry. Informal, unplanned interactions are essential to your company’s culture; they just need to be re-configured for this new world. Don’t overthink it.  Ask employees to make suggestions. Encourage perfectly imperfect solutions – they don’t have to be measurable – they just have to quench the thirst for the culture that already makes your organization great.

Are you interested in engaging your employees and transforming the way they work? Reach out to our Organization and Culture experts today and hear how we are helping clients just like you.

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Embracing the DTC Business Model for B2B2C

New ways to view content, community and commerce can help reframe outdated business models.

Reframing a direct-to-consumer business model for a B2B/B2B2C enterprise will uncover customer growth and loyalty.

Brands engage directly with your customers, no matter who they are or what your business is. Through social media and Ecommerce, everyone from buyers at enterprises to end consumers see direct channels as table stakes. So, how are you directly engaging with your customers to transform and grow your business? And if you still haven’t gone direct, there’s no day but today. Here’s why.

Direct-to-consumer (DTC) businesses have disrupted many legacy business models. For example, Lemonade took on the insurance business, a high-margin industry, armed with intermediary agents and salespeople, and took it directly, without the dependency on channel partners. And they were welcomed on Wall Street with a stellar IPO. Even more impressive is how they figured out a way to make SEO work for them with a brand name like Lemonade.

With new players coming up fast, even in commercial industries, like energy and manufacturing, legacy businesses need to understand the challenges of DTC brands (which I have covered in previous pieces here and here). Then, they need to look to apply a DTC model to a highly scaled, operationally savvy business. Applying DTC principles and tactics to your business might be the secret sauce you’ve been looking for in transformative growth.

Here’s why B2B companies need to embrace a DTC model. 

Your customers are consumers, too

With the massive growth and adoption of digital-native companies like Amazon, Uber and DoorDash, the expectations around customer experience have shifted. Ease of use, transparency, high accessibility and availability are part of the digital customer experience. So why would the same person who tracks their dinner delivery en route, not have the same expectation of transparency and updates with critical business transactions?

Innovate or die, but at least go down fighting 

In the very near future, the next generation of DTC businesses will reach a level of growth and maturity because they’ll have out-innovated incumbent companies. They will catch up on brand portfolio management, optimization of the distribution and operational scale and strategic inorganic growth. These new entrants will be positioned where long-standing companies will no longer have much leverage to compete.

However, there is still a window of opportunity for incumbents to act; but, fast innovation must be the mandate. There aren’t any fancy tricks in innovation, but embracing a design-thinking and strategic-testing gut will be necessary to turn a big ship. How much are you investing in innovation? What criteria are you using to consider companies to watch, partner with, invest in or buy?

Help me help you 

The common concern we hear with B2B and B2B2C companies is the fear that going direct will cannibalize channel business and hurt long-standing, trusted sales partnerships. However, if done right, owning and bolstering your direct channels should actually improve the overall brand experience, which helps your sales and retail. Applying a DTC mindset doesn’t require launching a direct commerce business. It does require the utilization of DTC business tactics in customer acquisition, performance marketing, branding, communication, customer service, etc.

“If done right, owning and bolstering your direct channels should actually improve the overall brand experience, which helps your sales and retail.”

At the end of the long day, the brand experience is on you. Customers place the burden of the brand—to deliver, to live up to the brand promise—on the brand itself, and not on intermediaries. Foregoing direct channels allows your channel partners to own conversations with your customers. A DTC model helps diffuse that dependence and rewards you with the customer data that can identify essential behaviors. Once you have these customer insights, you must create an environment where partners can learn from your data and further strengthen the partner relationships.

Speaking of first-party data…

Ain’t no party like a first-party data, ‘cause a first-party data is first.

One of the biggest benefits of going direct is owning, controlling and learning from direct customer data. The learning is key. The immediacy of readily available data is key. Customer insights to be applied, tested…rinse and repeat. It equips you to expedite learnings by shortening the feedback loop, to observe and listen to your customers, and to raise critical business decisions, faster and earlier. Annual customer insight reports are interesting, but oftentimes it’s too late. It reports history. You want your data to work for you to inform your next steps. A DTC mindset means looking at your data daily, even hourly, in performance-based operational models.

The DTC Trifecta – Content, Community and Commerce

The undeniable power in direct-to-consumer is when you have the winning combination of content, community and commerce in a beautiful orchestration. Being a great storyteller to a devoted brand tribe will deliver on customer loyalty. The DTC Trifecta is the goal, and building each muscle does not require all three to be there to start. Don’t have direct commerce, don’t think you ever will? Then build your content and community. Don’t have a dedicated brand tribe or community yet? Then build your content to attract an audience so you can nurture and grow a community.

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Hopefully, you are persuaded by now. And sure, the words are straightforward, but we know that the process and path for change are windy. If you’re wondering where and how to start applying a DTC mindset, we’re here to help. We’re happy to share with you what we are seeing in your direct industry and competitors. And can help determine how to get started. Let’s chat.

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The Four Pathways to Cultural Change and Business Transformation in China

Our research illuminates the change mechanisms with the most impact, both within China and beyond.

As organizations build resilience amid world-altering shifts, transformation is increasingly relevant. Yet change is challenging, and leaders are often unsure where to start–or where to go next.

For transformations to succeed, the importance of an organization’s culture is beyond question. That said, cultural transformation is often the most significant challenge to take on. Prophet’s 2020 global research based on nearly 500 global transformation leaders, “Catalysts in Action: Applying the Cultural Levers of Transformation,” identifies four pathways of cultural change intended to help companies focus.

“For transformations to succeed, the importance of an organization’s culture is beyond question.”

In this article, we discuss some of the main differences we see between companies in China and the rest of the world, with observations that can help spark uncommon growth.

In many ways, businesses in China approach transformation differently. Compared to other regions, they are more willing to embrace change, and this by a high margin. The Alibaba Group epitomizes this attitude, making “Change is the only constant” one of its core values.

Q: Which of the following best characterize the most recent significant transformation project that you have been involved with in the last two years?

More companies in China are embarking on cultural transformation to keep up with changes internally and to maintain a competitive edge externally. Ping An has started an enterprise-wide digital transformation over the last few years by embracing a culture of innovation and by encouraging to fail often and fast. ByteDance has implemented a bottom-up approach to objectives and results that encourages more transparency and an entrepreneurial spirit. Haier has made employee management and culture central to Haier’s strategy, with hundreds of internal micro companies yielding far better and faster innovations and deeper understanding of local consumers needs around the world. So, we want to understand how business leaders can accelerate growth through cultural transformation.

Proven pathways of change indicate where to start–or where to go next–in transformation. Prophet’s research identifies four pathways of cultural change: Defining, Directing, Enabling and Motivating. All paths are relevant at varying points in time. But it is important to determine which is most relevant to your company right now.

1. Defining the transformation: Don’t overlook middle management.

Consider this the “control tower” for all other pathways. It is where the company solidifies its business and brand strategy, purpose and values. The C-suite is seen as most critical to–and most responsible for–driving the transformation. But this cannot be at the expense of empowering managers, who must serve as key change agents.

This is a regional weakness in China, with only 17 percent of business-unit leaders and middle management given adequate responsibility. While companies in China are more willing to communicate the change widely across the entire organization (46 percent of Chinese companies actively engage most employees, versus 19 percent in rest of the world), decision-making is still led by C-level leaders. And managers are less empowered to drive change.

Q: What level of leadership is most responsible for driving transformation in your organization?

One of the few companies in China that realizes the importance of driving transformation from the bottom up is footwear manufacturer Belle International. A key component of its success has been decentralizing data and using digital as a tool to empower retail managers, giving them more freedom to lead their teams. “I’ve always believed that the vitality of the end market comes from the energy of each store manager and staff,” says Liang Li, executive director, in an interview with Harvard Business Review.

How to accelerate transformation: Find ways to involve BU leaders and middle managers more, creating meaningful roles. They are the connective tissue between the overarching transformation objectives, the marketplace and the day-to-day work of employees.

2. Directing the Transformation: Empowered TMOs yield impact.

This pathway requires taking a holistic view of all the governance, processes, roles, systems and tools needed to enable an operating model that makes transformation real. One way companies do this is by creating transformation management offices (TMOs). Those that have done this have a clear advantage. And those that have given these TMOs the most oversight and influence over decisions are the most successful.

This is an area where companies in China are leading in the way, both in setting up these TMOs and in giving them more oversight. With clear results: 76 percent of companies in China that have established empowered TMOs, are reporting very positive impact.

Q: Which of these best describe the impact that your organization’s transformation management office (TMO) has had?

How to accelerate transformation: A first step toward changing this is establishing a TMO. And if one already exists, make sure its scope is more than just project management. TMOs should be allowed to shape strategy, break down functional silos and coordinate vital initiatives on the transformation roadmap.

3. Enabling the Transformation: Build the capabilities and leadership needed.

This pathway is where organizations identify, source and build capabilities required for employees to thrive. And it is essential if organizations want to succeed in the Digital Age. The current talent landscape demands a compelling employee value proposition (EVP), but this is no longer enough. Companies must take a strategic approach, reimagining where and how they will find the talent needed to power their ambitions.

Although 90 percent of companies in China say that they have aligned talent systems in service of the transformation, there are still some gaps. While China does well-developing employees’ technical skills, it lags when it comes to nurturing the leadership expertise required for transformation. Globally, this leadership upskilling is prioritized by 48 percent of companies and just 35 percent of those in China.

Q: What training topics have been of the greatest need to enable your organization’s transformation?

How to accelerate transformation: Continually assess enhanced capabilities and develop ways to both re-skill existing talent across seniority levels, as well as source new hires through a more strategic approach to workforce planning.

4. Motivating the Transformation: The only failure is failure to learn.

To bring organizational change to life, leaders must behave differently. They must embody the transformation, creating trust among employees as they adopt new ways of working. Stories, rituals and symbols help build belief among employees and connect their day-to-day work to the organization’s new direction. Most organizations rightly celebrate success stories, while failures are less likely to be shared and understood. Focus on levers that create safe spaces and mechanisms for employees to talk about what is working and what isn’t.

This is yet another area where companies in China excel. Despite a directive leadership style, China has embraced a “fail fast and learn” approach that promotes experimentation, with 58 percent of Chinese leaders saying their corporate culture tolerates failure, compared to just 32 percent in the rest of the world.

Q: Which of the following best characterizes the way your organization responds to failure during your recent transformation?

And leaders in China are far more likely, at 79 percent, to encourage experimentation in executing alternative initiatives relative to plan compared to the rest of the world, at 44 percent.

“Risk-taking is strongly encouraged, and failure isn’t stigmatized,” says Jessica Tan, deputy CEO of Ping An in an interview with McKinsey. “What I’ve found is that with each new success, you become more confident in your abilities and your instincts to try the next big thing.”

How to accelerate transformation: Bring teams and divisions together by encouraging the “fail fast and learn” mindset to develop a systematic approach to test-and-learn thinking. The more employees can see these efforts, the better they will understand the transformation process.

Many businesses in China have already made a good start on cultural transformation and recognize its importance in driving growth. Companies in China should continue to pursue those initiatives while shoring up their efforts to teach invaluable leadership skills. But they can’t neglect to take a holistic view to make sure they are setting all aspects of the enterprise up for future success. That means making sure they know how to….

  1. Define transformation: Set a powerful ambition and align with leadership, at all levels, on their role in achieving it
  2. Direct transformation: Establish and empower transformation management offices to optimize operating models
  3. Enable transformation: Match talent strategy to transformation goals, and elevate employees through future-state capability planning
  4. Motivate transformation: Develop culture programs and training to reinforce employee behaviors

—

References:

  1. Ngai, Joe. Building a tech-enabled ecosystem: An interview with Ping An’s Jessica Tan. McKinsey Quarterly, December 2018
  2. Yuhao, Liu. 别跟字节跳动讲管理 [Don’t Talk Management with ByteDance]. https://www.huxiu.com/article/344321.html. March 13, 2020
  3. Zhen, Wang. 海尔裂变：2000亿公司创业的样本 [Haier’s Fission: A Case Study of How a 200 Billion Company Creates Startups]. https://www.yicai.com/news/5284427.html. May 14, 2017
  4. 百丽国际：让数字化赋能离客户最近的人 [Belle International: Let Digital Empower Those Who Are Closest to the Customers]. Harvard Business Review, January 25, 2019

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The Way Forward – Key Tips to Reimagine Your Business in Southeast Asia

The future lies in an agile operating model, diversified delivery models and reimagined stores.

his is the second article of our two-part series “Digital Transformation in Times of Turbulence” originally published on Brandberries.

“What’s next? The future of shopping will continue to be conducted largely from the home, while remote learning, gaming, cashless and proximity payments will all ramp up and become the norm.”

Thriving in the post-COVID-19 future will ultimately require changes in how companies think about staying relevant to consumers while managing increased operational complexity, as well as potential delays in the rebound of demand and customer traffic. Combined with sales migration toward online channels and the renewed focus on value, these changes could contribute to margin compression. Moreover, there are certain behaviors that are likely to shift fundamentally, requiring reconsideration of the consumer proposition and companies’ go-to-market strategy and operating model.

What’s the “New Possible”? Four Tips to Reimagine Your Business

New attitudes toward physical distance, health and remote working will create opportunities related to therapeutic properties and mental wellbeing. Companies will work to diversify supply chains while continuing to invest in digital tech and virtual experiences to maintain engagement. Based on our research, there are four tips to prepare for the Next Possible:

  1. Rethink Role of Physical Store
  2. Rethink and Diversify Delivery Model
  3. Double Down on Digital
  4. Embrace an Agile Operating Model

1. Rethink Role of Physical Store

Although digital shopping has accelerated, physical stores retain appeal. Consumers in SEA expressed the desire to return to physical stores, particularly to shop for apparel, mobile phones and domestic appliances. Clobbered by the crushing effects of the pandemic, thousands of retailers from Bangkok to Singapore have rushed to set up online shops on big e-commerce platforms to stay afloat this year. Now shopping malls across the region are going virtual for the first time. The pandemic has pushed retailers to move beyond the traditional view that physical locations are primarily for in-store customer engagement. Promising new models have begun to take hold.

New Replica Virtual Mall

In Singapore, Marina Square Shopping Mall — nestled among luxury hotels and popular tourist attractions — is taking more than 30 of its tenants online with Lazada, the Southeast Asian arm of Alibaba Group. It’s the first shopping center in the city-state to create a mini virtual replica of its physical mall. This follows similar moves by Siam Center, a landmark shopping mall in Bangkok built in the 1970s, which teamed up with Lazada to set up its virtual mall with about 40 tenants. In Indonesia, more than 100 tenants of three malls by developer Pakuwon Group are going live on Lazada. Lazada, which operates in six countries in Southeast Asia, launched its virtual mall called Lazmall in 2018, allowing brands to set up their own online stores.

Bring an In-Store Feel to the Digital Experience

The inability to engage customers in a physical environment has pushed some retailers to bring more of the in-store experience online. First, leading retailers have substituted in-store personalized interactions with offerings such as virtual appointments, where sales associates use videoconferencing platforms to offer personalized attention to customers. Similarly, retailers are using live streaming to engage with customers and increase revenue and loyalty by sharing experiential content. Second, retailers have been developing alternative engagement models to take the risk out of digital-purchasing decisions. In apparel and fashion, for example, one of the main impediments to online purchasing has historically been the inability for customers to see how items would look on them. Jewelry brand Kendra Scott is tackling that problem by launching a new platform, Virtual Try-On, which uses augmented reality (AR), machine-learning and computer-vision techniques. Shopify, which allows its merchants to add 3-D models to their product pages, found that conversion rates increased by 250 percent when consumers viewed 3-D products in AR.

2. Rethink and Diversify Delivery Model

COVID-19 has heightened the importance of safe delivery modes, including curbside pick-up and aggregator delivery. Retailers have scrambled to launch services to meet this demand. Retailers are also reassessing store formats to support third-party delivery services. Some groceries are creating “speed zones” near the front of the store and stocking them with the most popular items to enable delivery companies to accelerate pick, pack and delivery of orders.

New Partnership to Enhance Convenience

Many retailers have explored strategic partnerships to enhance convenience for customers and boost sales. These new ecosystems allow retailers to gain access to new capabilities and extend their brand reach to new customers. There will be higher expectations for offline experiences to create even higher value beyond what can now (mostly) be done online. Customers can order from food halls or PD Pasar Jaya (Wet market) through Whatsapp in Indonesia, and goods will be delivered via Gojek. The Singapore government also helps food and beverage owners go digital through the Food Delivery Booster Package. Aprindo, which groups about 150 local and national retail companies with a total of around 45,000 outlets across Indonesia, launched a novelty “Park & Pickup” feature. It allows customers to order their groceries via WhatsApp or the Hypermart online store and pick up their orders at the parking lot. There’s no need to get out of the car because staff will deliver the goods to the car.

3. Double down on Digital

As consumers use more digital channels, it is important for companies to ensure that their experiences at each touchpoint are consistent, generate delight and further enhance companies’ understanding of consumers. This requires brands and companies to not only be open to shifting their marketing messages but also invest in analytics capabilities and reallocate financial and talent resources as needed.

Dial up the Acquisition and Drive Traffic to Digital Assets

Retailers can partially offset diminished foot traffic in physical stores by boosting investments in online acquisition. With more investment in online marketing, winners are adapting their strategies to account for shifts in consumer behavior.

Extend Digital-Channel Presence and Engagement

Shelter-in-place orders have led companies to test new methods of customer engagement. Many retailers with established mobile apps have cited record downloads, while others sought to make up ground quickly. In addition, while building and nurturing online communities are not new ideas, they have gained significant momentum. Retailers are augmenting direct customer interactions with engagement in apps and other relevant channels. Nike, for example, activated its digital community by offering virtual workouts and saw an 80 percent increase in weekly active users of its app.

Ensure That the Digital Experience Is Truly ‘Zero Friction’

Customer expectations are rising for digital channels in terms of site loading speed, stability and delivery times. To keep pace, retailers should start by designing web pages that are optimized for digital shopping. For example, making the highest-selling (and ideally highest-margin) products easy to find helps to make the customer journey more seamless. The first page of Lazada listings receives nearly two-thirds of all product clicks. With more customers now engaging through mobile devices, retailers must ensure that all digital channels are integrated and offer consistent services (such as payment options) and experiences (such as shopping carts updated in real-time across devices).

4. Embrace an Agile Operating Model

The pace of change in the post-pandemic environment will force retailers to continually reassess their strategies. This approach requires more real-time insights on customers as well as a new agile operating model to harness these insights and put them into action. The next normal is still taking shape, and customer expectations will continue to shift in response. Retailers that focus on customer experience and respond with agility and innovation in their omnichannel experiences will fare better and strengthen their ties to customers.

Real-Time Behavioral Tracking

Before the pandemic, digital leaders were using data to optimize customer experience, gauge satisfaction, identify foot traffic trends and generate purchase recommendations. Winning retailers are moving beyond surveys as a mechanism for customer input and toward near-real-time tracking of consumer trends and behavior With the rise of digital in recent months, companies will have even more dynamic data at their fingertips, and they can use these data to extract immediate insights. For example, many retailers have seen an influx of new customers to physical stores (for essential retail) or digital channels. Winners will generate insights from these new customers and construct targeted retention plans, messages and offers to maintain the customer relationship in this era of brand switching and cost-consciousness. Social media is another channel that offers insights on rapidly changing consumer behaviors.

Agile Innovation and Test & Launch

By adopting agile practices alongside the generation of real-time consumer insights, retailers can more quickly re-calibrate their business model and offerings to meet consumer expectations. Retailers need to raise their metabolic rate—that is, the speed at which they process information and develop new offerings. The speed at which some retailers have been able to stand up new omnichannel models (for example, launching a new delivery business in three weeks) shows what a truly agile operating model can unleash. A rapid approach to tests and trials can enable retailers to launch offerings at scale more quickly and avoid losing share in the face of shifting consumer behavior.

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This is the second article of our two-part series “Digital Transformation in Times of Turbulence”. Read the first part of our series here to learn more about the emerging consumer trends in the new normal in Southeast Asia.

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As the saying goes, “disrupt or be disrupted.”

For those who think and hope things will basically go back to the way they were: Stop. They won’t. All businesses, especially retailers, that do not start embracing digital as part of their business strategy may see themselves left behind as their businesses falter.

Finally, shoppers still appreciate the “touch and feel experience” of physical stores. As such stores need to reimagine end-to-end consumer engagement on digital channels and seamlessly link online and offline experiences to radically accelerate in-store omnichannel integration. Companies that are both digital and offline, rather than one or the other, will be better positioned in the days ahead—especially if they can use both to create a mutually reinforcing customer ecosystem.

Contact us to learn more about what levers you can pull to reimagine your business for uncommon growth in the post-COVID-19 era.

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Four Consumer Trends Defining the New Normal in Southeast Asia

Companies are responding to regional demand for better experiences, more tech and a new look at wellness.

This is the first article of our two-part series “Digital Transformation in Times of Turbulence” originally published on Brandberries.

“With COVID-19, the pace towards digital adoption is now urgently accelerated and will reshape not only the future landscape of business but also transform lives of many consumers in Southeast Asia.”

Without a doubt, COVID-19 has caused unprecedented disruption with profound impacts on economies, businesses and consumers, changing the way we live, work and shop. While no one can predict what the new possible will be, it is clear that economies will not emerge unscathed. Not to mention, the daily routines and lifestyles of consumers, redefined by social distancing and a new contactless economy, will change consumer behaviors—some permanently.

As consumers continue to struggle with the spread of the virus, lockdowns and new daily regimes, they are also affected by rising unemployment and deteriorating earnings. In Southeast Asia, where more households fall into lower-income segments, there is growing anxiety that undermines consumer sentiment. Many are planning to delay or forego bigger-ticket purchases and seek better value. We also saw a shift in brand loyalty.

SEA’s underbanked & unbanked’s challenge:

One major phenomenon that has emerged from the COVID-19 pandemic is the higher demand for e-commerce and digital payments. This however poses a major challenge because of the 400 million adults in Southeast Asia, only 104 million are fully “banked” and enjoy full access to financial services. Another 98 million are “Underbanked”, while 198 million remain “Unbanked” and do not own a bank account. Nearly 70 percent of all businesses in Southeast Asia are driven by small and medium enterprises with millions of mom and pop shops scattered everywhere within cities and rural areas. These segments of the market are most adversely affected by the digital challenges of the contactless economy.

Despite years of rapid urbanization and industrialization with a huge growing young and tech-savvy population, the state of digital transformation in most of Southeast Asia has been rather slow. The pandemic has compelled companies to embrace the idea of telecommuting, pushing brands and retailers to go digital. Yet the massive change brought about by the pandemic also makes consumers re-evaluate their life priorities, giving rise to new values and spending criteria. Many of the behavior shifts, including a focus on family or community, health and digital solutions, are expected to last a long time, even in the aftermath of the crisis –particularly if the crisis itself endures.

For retailers, the starting point matters in a crisis. Organizations that can quickly reimagine their omnichannel approach to create a distinctive customer experience will recover faster from the pandemic. Analysis of the financial crisis of 2008 shows that customer experience leaders rebounded more rapidly, saw a shallower downturn, and ultimately achieved three times the total shareholder returns compared with the market average.

Emerging “New Normal” in Southeast Asia

Although the pandemic’s impact varies across Southeast Asia, we see Four Emerging Trends as consumer behaviors are settling into a new normal:

  1. New Meaning of Value and Loyalty
  2. Flight to Digital and a New O2O
  3. Wealth and Health Redefined
  4. Hometainment and the New Experiential Consumer

1. New Meaning of Value and Loyalty

As consumers hunker down for a prolonged period of financial uncertainty, they intend to continue shifting their spending largely to essentials, such as grocery and household supplies— cutting back on most discretionary categories. While purchase intent is increasing on a large set of categories for more developed markets like Singapore, the region will remain weak in discretionary categories such as apparel, footwear and travel.

New Value Economy

As with the previous financial crisis, SEA consumers are thinking about price and quality, with increased price sensitivity and more careful consideration of non-essential spending as countries re-open. However, based on surveys by McKinsey and Nielsen, shoppers in SEA intend to spend more on skincare and apparel in the future than they did before the outbreak, almost akin to “revenge shopping” due to the prolonged lockdown at home.

Emerging Value Polarization

We also see a trend of more consumers in the region making a distinction between price and value. While many will shift preference toward a low-priced value proposition in order to be prudent, they still expect superiority in quality and performance. Sustainability (reusable and recyclable) will continue to grow as would hygiene demands.

Shift in Loyalty

For certain products and brands, COVID-19 caused supply chain disruptions. And when consumers couldn’t find their preferred product at their preferred retailer, they changed their shopping behavior. Many consumers have tried different brands, shopped at different retailers, or even explored new shopping methods (with many trying online for the first time) during the crisis. Value, availability and quality (or organic products) were the main drivers for consumers trying a different brand. We expect these changes will shape consumers’ habits, even beyond the effects of COVID-19. Many consumers who tried a new behavior plan have already expressed a desire to stick with it post-crisis.

 2. Flight to Digital and a New O2O

The pandemic has spurned a new “contactless economy,” accelerating digital, such as the rise of online click & collect, frictionless retail, direct-to-consumer (DTC) and a new delivery partnership model. Across SEA, many categories are seeing huge growth in their online customer base. Many consumers plan to shop online even when brick-and-mortar stores re-open. Social distancing measures, which will stay in place for the foreseeable future after the market re-opens, will likely mean (in-store) shopper traffic in the new normal will be lower than pre-COVID. More people will choose to shop in the comfort of their own homes.

A New O2O is Born

In SEA where the majority of micro-businesses (mom & pop shops) operate primarily with cash and almost zero online presence, the pandemic proved to be a tough period. To help these micro-businesses, a new initiative by the Singapore government’s Infocomm Media Development Authority (IMDA) is helping stalls in wet markets go online. The initiative is currently being trialed by Tekka Market in Serangoon. Stalls in the market will use Facebook Live to sell their products and interact with their customers. The theme of the project is ‘Why jalan jalan (a colloquial term for going out) for your kailan (Chinese broccoli)?’ Customers can order products from the stalls during the Facebook Live video, confirm their details through Facebook messenger and make payment via PayNow, a local instant funds transfer service. Those who spend over S$20 will also be eligible for free island-wide delivery and produce will be delivered to them within the day. We see live “sales” streaming playing a bigger role in SEA, both engaging with consumers as well as selling products.

Legacy + Digital = Next Gen Partnership Model

Retail restrictions in place during the pandemic have fast-tracked the shift to digital distribution. Local delivery operators in SEA have adapted their services to better meet customer demand. During the Islamic holy month of Ramadan, GrabFood launched a contactless campaign that gives customers the flexibility to schedule contactless delivery in advance. Grab is also growing its partnership with traditional brick-and-mortar retailers and restaurants, with an uplift in delivery businesses such as GrabFood, GrabExpress and GrabFresh powered by HappyFresh/GrabMart. Online delivery services, contactless shopping and cashless transactions will be a major theme for the future retail landscape, with major chain stores already seeing customers opt for those services.

Rise of eWallet and Digital Payment

Digital payments are fast gaining currency in the SEA as consumers ditch cash to avoid physical contact. The COVID-19 pandemic, coupled with the implementation of cashless payments for public services, prompted non-cash transactions to grow rapidly during the first four months of 2020. In the Philippines, Mynt’s GCash and PLDT’s PayMaya expanded to contactless payments in taxis. In Thailand, AIS and Kasikornbank partner to launch VIA that helped micro-businesses vastly during the pandemic. In Vietnam, the number of transactions through mobile payments was up by almost 200 percent and the number of transactions by 22 percent respectively during the lock-down period. Tencent-backed ZaloPay, Warburg Pincus backed-Momo and Grab-backed Moca also saw huge adoption during this period. Grabpay (by Grab) and GoPay (by Gojek) who are already one of the largest adopted e-wallets by underbanked segments, further strengthened their super app businesses into delivery, health and retail during the same period.

3. Wellness & Health Redefined

Across SEA, consumers who are fearful of the virus have become more careful when deciding where to shop. They now look for retailers with visible safety measures, such as enhanced cleaning and physical barriers. In addition, they buy more from companies and brands that have healthy and hygienic packaging and demonstrate care and concern for employees.

Mental and Emotional Wellness Takes Center Stage

The notion of happiness has become a more tangible commercial prospect during the pandemic. Digital and tech-enabled self-care solutions have gained further importance in preventative health, alongside immune-boosting, de-stressing and soothing product credentials. Home as a health hub is re-emphasized; at-home gym; at-home therapy, home hygiene and healthy cooking practices now grow in precedence.

Growth of Telemedicine

Although telemedicine has been growing worldwide, it has always been less popular in SEA. During the pandemic, we saw a demand spike in the region. Patients who suspected they’ve caught COVID-19 could get a preliminary diagnosis and next-step advice. Patients with other medical needs could consult with physicians digitally when physical care facilities were unavailable. Two startups meeting medical needs in Indonesia during the pandemic: Alodokter and Halodoc (both names mimic “Hello, doctor” in a regional accent) link patients at home with physicians for online consultations. These startups have shown robust growth for two reasons. One, Indonesia has many citizens in remote rural areas, far from quality health care. And two, the nation’s government has put the firms on an official list of care sources that even big-city residents should use.

 4. Hometainment and the New Experiential Consumer

Groceries and food, together with indoor exercise equipment and gaming tools, have emerged as the most popular categories for online shopping. And the uptrend in online shopping is set to continue even after countries relax restrictions, with experts predicting that e-commerce will play an even larger role in the “new normal” than ever before.

Home is the New Hangout

COVID-19 forced consumers to adjust to home life being where we work, learn, shop, exercise, socialize, entertain and more. As stores re-open, they should not try to “compete” with the home, but rather complement it to enable desired behaviors at home. This new trend led Gojek, founded in Indonesia as a ride-hailing company, to accelerate the launch of GoPlay, a streaming entertainment because of the pandemic. A key part of the GoPlay play is to offer locally customized content such as the release of Gossip Girl Indonesia, licensed from Gossip Girl Similarly, many gyms started online sessions, with strong sign-up rates, and will likely continue even after the markets reopen.

Reinventing Home Digital Experience

The expanded cohort of experiential customers creates strategic opportunities across products and services, from personalized luxury to wellness routines, gourmet experiences, that further digitize education and entertainment.

Hometainment Is Here to Stay

Even though many countries have lifted stay-at-home restrictions, most consumers still believe they will stay home more. Most consumers across countries still feel they are not ready to be back to “regular” out-of-home activities. With the surge in e-commerce, raising brand awareness and customer acquisition via a variety of platforms, from e-commerce presence to sales via their own shopping sites and subscription models. SEA consumers are unlikely to go back to their old habits of frequently dining out and will instead prefer takeaways and eating at home after the COVID-19 pandemic, according to a study by Nielsen. The study also revealed that consumer has signaled their eating habits may change permanently.

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Once customers get used to doing things digitally, it’s going to be hard to go back.

It is better to accept the reality that the future isn’t what it used to be and start to think about how to make it work. To accelerate the road to recovery, leaders need to instill a spirit both of purpose and of optimism and to make the case that even an uncertain future can, with effort, be a better one.

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This is the first article of our two-part series “Digital Transformation in Times of Turbulence”. Stay tuned for the second and final part of our series to learn more about accelerating digital transformation in Southeast Asia.

Contact us to learn more about what levers you can pull to reimagine your business for uncommon growth in the post-COVID-19 era.

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The Human Need for Shared Spaces

The human need for shared spaces

As businesses welcome people back after months of fear and uncertainty, nearly all have been forced to think differently about their “shared spaces.” For all the anxiety about the details, (Are we opening too soon? Too slow?) there’s an undeniable joy, too. People want to be together.

“I don’t know when it will be safe to return,” wrote musician Dave Grohl, in a recent Atlantic Monthly essay about the return of live concerts. “But I do know that we will do it again, because we have to. It’s not a choice. We’re human…we need each other.”

Businesses know this is true. And in amazingly short order, they’re figuring out the safety protocols, redesigning experiences for physical distance and better sanitation. But the post-pandemic reopening is offering the opportunity for something much bigger: A complete reimagining of these spaces, a reset of their purpose, a shift to in their development and, most of all, a new standard for trust.

The smartest companies are asking how they can use this moment not just to reignite, but also to accelerate the transformation that was in front of them even before the crisis. Doing so requires a teardown of current thinking, with great sensitivity to the many ways the world has changed. These leaders aren’t waiting around for “the new normal.” They are looking ahead to what some are calling “New Possible.”

Purpose: Finding meaning in shared spaces

From retailers and restaurants, to hotels and hospitals, the best practices for sanitation, hygiene and crowd density become clearer every day. Many organizations are making customers and employees protection from illness their highest priority. But now that doors are opening, what’s missing is the bigger issue of purpose, and why these spaces exist at all.

Their function is obvious. Everyone knows what people do at airports, theaters and sushi bars. But that’s not the same as understanding purpose. These places exist to connect, inspire and nourish us, to feed our larger need to be with others. It’s what we feel in these spaces, not what we buy there. Companies need to take this moment to reimagine the potential of shared spaces to fill these deeper needs.

Office buildings are a good example. Initially designed as a place for productivity, architects typically devoted 70 percent to productivity-focused areas and 30 percent to collaboration spaces, such as conference rooms and teaming rooms. Now that we know people can be productive anywhere, offices need a new purpose and perhaps a different allocation of space. Are they centers for occasional collaboration? Are they places where coworkers can bond and support each other?

Service design: Empathy-driven innovation

Increasingly, companies are viewing shared spaces with an eye toward service design, which means treating space as a tool to make lives easier for those who use them. They’re developing new experience principles, and aligning those with overall business strategy.

That includes physical innovations to make layouts, interiors, materials, fixtures, furnishings and equipment work together to deliver effective yet safer interactions. New spaces will be easier for employees to sanitize, and built in a way that this cleanliness is evident to worried customers.

Digital tools in physical spaces play an enormous role. These include no-touch operations, such as motion actuation, facial recognition, voice activation and gestural interfaces. Mobile devices are emerging as a critical component, allowing for seamless experiences within a physical space, developing “sensing” capabilities and user-data capture to track behaviors for better and safer operations.

Some of these innovations are small, obvious and even quick, like foot-activated doors. Others require major mind shifts and soon, new buildings. As health experts learn more about air quality and its role in disease transmission, for example, heating, ventilation and air conditioning are no longer architectural afterthoughts. They’ll become key considerations in new design.

Trust: Re-earning confidence

When it comes to shared spaces, nothing is as important as trust. People need to feel that they can count on the companies they deal with to keep them safe when they venture out–including protecting them from people who might be less concerned with physical distancing than they are.

Foundationally, people build relationships with brands through trust. In recent years, that’s focused on brand quality. But today, trust is measured by how the company did or did not respond to the crisis, or how it is restarting. People are asking: Do I trust this airline to keep me safe? This shoe store?

This won’t be easy, especially since many companies have already broken this trust, and continue to do so. Those that can regain customer confidence by offering safety and consistency will find themselves more relevant than their competitors.

Creating a culture of care

All three of these–purpose, service design and trust–require companies to lead with radical empathy, creating spaces where humans feel safe, respected and happy.

It calls for a culture of care. This need for empathy is profound, based on the knowledge that even as many people long to be back in shared spaces so they can feel more human, many are also frightened.

Cultural care becomes a key ingredient. Germ control and crowd management may be essential, but if handled too aggressively, they can seem hostile and unfriendly. And that can interfere with the elements of hospitality, warmth and sanctuary people crave in public spaces.

With that in mind, companies can approach every decision about physical space through these three lenses:

START: What new functions, services or physical elements should the space contain that are not part of the current design?

STOP: What functions, services or physical elements of the current model should no longer be part of the experience?

CONTINUE: What functions, services or physical elements of the current model should be kept as part of the experience?

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Companies must remember that what matters is the experiences people have in these spaces. People will remember what companies do, not what they say, no matter how many “We’re in this together” signs they hang. The old saying “actions speak louder than words” is truer than ever.

Are you interesting in redesigning your shared spaces so your business can achieve uncommon growth tomorrow and into the future?

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Achieving the Next Level in DTC

Amid growing pains, even digital natives are learning the value of hitting the “refresh” button.

There may never be a better time for incumbent companies to prioritize DTC, even for just a single product line. Pandemic disruptions to retail channels and supply chains mean people are more open to new ways of buying everything— from potato chips to manufacturing equipment. However, it’s not just about launching a new brand with a sans-serif modern logo using an outdated DTC playbook.

Going direct-to-consumer is hard. It requires a new mindset that embraces a performance-based approach. Many digital natives are experiencing challenges to reach that next level of growth. And the scale and operational rigor that incumbents can bring might be the combination to unlock that next level of DTC magic. Let’s break down how to achieve the next level in the DTC ecosystem.

DTC Through the Lens of the Pandemic

There’s no arguing that these are dark times for many direct-to-consumer businesses, especially for some formerly high-flying digital natives. But while the era of the DTC unicorn and massive acquisitions may have hit some roadblocks, more significant changes to the marketplace are underway. Despite the pandemic-induced decrease in consumer spending, those digital natives with the strongest communities, such as Peloton and thredUp, are thriving and among the top DTC brands. And many legacy companies, especially those in the CPG and B2B arenas, are adding DTC lines. Companies like Pepsi and Ocean Spray are going direct not just to recoup revenues lost to COVID-19 disruptions, but also to gain vital insights that inform the rest of their business strategies.

“These companies are learning that the direct channel is a game-changer that deepens customer relationships.”

These companies are learning that the direct channel is a game-changer that deepens customer relationships. It’s not just about digital channels and sales, but about cultivating meaningful engagement through DTC branding and marketing. By building communities with relevant content, help and services, customers interact with them again and again. And with the data these companies glean from DTC channels and transactions, they’re finding ways to innovate throughout the entire enterprise. The benefits of real-time access to direct consumer data and communications just weren’t achievable before with traditional B2C and B2B models.

Digital Native Growing Pains

But first, it’s worth taking a close look at why so many of the DTC companies are struggling. Even before the pandemic, the DTC market was shaky. The cost of customer acquisition had been increasing at staggering rates. DTC marketing on social media in a diluted digital marketplace was less effective, so brands began leveraging physical and traditional platforms such as billboards and subway stations. And in growth-at-all-costs mode, many rushed into physical retail, either with their own storefronts or pop-ups with retail partners.

For many, the goal wasn’t near-term profits, but a near-term exit. And that worked for some, including Unilever’s $1 billion deal for Dollar Shave Club in 2016 and Amazon’s $1 billion purchase of Ring in 2018. But megadeals in recent times have been scarce.

Others hoped to cash in by going public. But the harsh reality is that Wall Street measures financial health differently than venture capitalists, with well-known DTC brands like Blue Apron and Casper struggling after initial public offerings. Others, including Airbnb, have delayed IPO filings.

And then there’s the bad behavior. Toxic leadership at places like Uber, WeWork and Away was a problem before the pandemic. But the worldwide crisis is shining a bright light on how businesses treat employees. Against the backdrop of illness, layoffs and widespread suffering, that kind of toxicity is especially damaging.

These visible meltdowns of a few call the organizational performance of the entire category into question. Once revered within DTC circles, Brandless’ demise and Outdoor Voices’ shakeup are sending strong reality checks to the venture capital funds supporting them. And the sharp downturn in consumer spending has sparked massive furloughs at top brands like Everlane, ThirdLove and Rent the Runway.

Refining DTC Acquisition Efforts

Some companies will come through this period stronger than ever, and this upheaval is creating many opportunities. Lululemon’s recent $500 million acquisition of Mirror proves that there are still deals to be made when the fit is right. For private equity and investment organizations, this may be an excellent time for acquiring undervalued DTC assets and putting cash behind those that have a differentiated offering and deep customer engagement.

For digital natives, it’s time to hit the “refresh” button. Top DTC brands should focus on optimizing organizational operations for sustainable growth, building with profitability controls. Painful as they are, furloughs can offer breathing room for companies to reset priorities for growth in this recovering market.

And it’s crucial to rethink customer acquisition. Before 2020, the focus had been on getting as many customers as possible at all costs. Now, it’s time to refine acquisition efforts with a retention and profitability filter. There is no standard DTC acquisition playbook. It’s taking a next-generation performance-based mindset of quality over quantity, anchored with a relentless focus and patience on customer value.

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There are perhaps even more significant opportunities for non-digital natives. Many have seen during this pandemic how disruption with intermediaries has stonewalled their business, with a breakdown in sales channels, impacts to inventory and distribution, and a gap in knowing their customer sentiment and outlook. And with the grim outlook for retailers and outlets, the gap in a direct-to-consumer conversation is exposing their immediate need for a direct customer relationship.

For those contemplating a DTC launch within the business, this may be the ideal time.

But the underlying principles are the same for all companies, whether they are a century old or a new digital startup. Brands that are authentic, relevant and genuinely helpful win customers over. DTC channels allow them to show up for people throughout the purchase journey. And at a time when many consumer behaviors are laced with fear and uncertainty, these brands build strong bonds through purpose, transparency and empathy.

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Brand Voice in a Crisis: What to Say When We’re All Speechless

A strong voice gives messages power, making a sprawling corporation feel like a single human.

The first time I was hired to develop a brand voice for a company was in 2008. Times were tough for a lot of corporations, and my client—a big, famous, legacy tech company—was no exception. They were feeling the effects of the financial collapse. Bleeding capital. Losing customers. Even the headquarters seemed stuck in the glory of the previous decade.

At the time, brand voice was quickly rising as a tool every brand had to have in its arsenal.  Before that, people talked about “brand personality” or “tone”, but it usually only got a half-page in a hundred-page Brand Guidelines book that covered things like font kerning and logo lockup. During that same moment, floating through the zeitgeist, was a sense that companies needed to stand for something more than just profits. The importance of having and promoting a strong brand purpose was on the rise. The economic fallout had created a general distrust after so many companies had acted in bad faith.

Companies that were driven towards a higher purpose, could better weather the times. As Nikos Mourkogiannis wrote in his book, Purpose: The Starting Point of Great Companies, “Not all companies have a purpose—but enduringly successful ones do.” Of course, having a purpose is not enough on its own. The organization around that brand must bring it to life through action and expression.

Enter brand voice.

As a person, my word choice and the way I speak express who I am and what matters to me. Brands are no different than people in that sense. A strong voice gives messages power. When individual writers and communicators across an organization can effectively unite around a clear style, rhythm, and point of view, it resonates with the people they are talking to and makes a sprawling corporation feel like a single human. Audiences, in turn, feel treated humanely. And, depending on the nature of the company and its voice, consumers can also feel cared for. Or amused. Or understood. Or put at ease. It all depends on who the company is—really, truly, deeply—and what it stands for.

Back in 2008, my client needed its audiences to get to know the company again, to believe that their positive memories added up to a brand they could trust. And in order to create a voice that could do that effectively, we had to get to know the company at a soul level.  We developed a way of talking and writing that represented who they’d been and where they were going. We trained stakeholders to use this voice to connect with the needs, desires and emotions of their audiences, to help strengthen positive feelings and make the people they spoke to feel cared for and confident. And it helped the company know what to say and how to say it, even in a crisis, when a lot of the news was bad news.

“We trained stakeholders to use this voice to connect with the needs, desires and emotions of their audiences, to help strengthen positive feelings and make the people they spoke to feel cared for and confident.”

And here we are again. Another crisis—or crises. We see brands trying to insert themselves into the reality we all face daily. In the days after we were all ordered inside due to the pandemic, and then, again, after the murder of George Floyd, our inboxes were flooded with messages from brands. Some of these messages were drawn from the core beliefs of the company. For example, Ben & Jerry’s issued a call to “dismantle white supremacy” in the wake of the protests, and it did not feel like lip service because it aligned with who they had always been. Bratz dolls came right out with a statement that quoted Desmond Tutu—and people responded positively in part because Bratz dolls had always promoted diversity and inclusion. As one twitter user said, “Bratz was the first toy brand I remember that really popularized black/minority ethnic dolls…They’ve been amazing for years!”

These were the messages that felt human, leaving us with a feeling of warmth, and a strengthened sense of loyalty. They used a voice that came out of who they are, what they’ve been, where they are going, what they believe. They were authentically drawn from each company’s real sense of purpose. Other companies felt the pressure to come out with a statement, too. But when they did not have the history to back up their words, the message felt hollow and patronizing.

So, the ultimate question. How can a company find an authentic voice to connect with people in crisis? Like all great changes, it begins with learning—who you are as a brand, and what you stand for.

  • A brand voice makes it possible for communicators across an organization to express its core beliefs—which means that before you find your voice, you have to have a deep look at who you are and what really matters to you. Look at your history as a company. What have been the moments where you showed the world your true colors? When has your company taken an action because of a value other than profits? Make sure to build that purpose into the voice.
  • A brand voice is a living, flexible tool that anyone can use—not just those of us who self-identify as writers. Start with big ideas about how you want to sound as a brand, finding a single persona or a short list (no more than three!) of attributes. But then, get granular. Find the tactics that everyone can employ every time they express themselves as the brand. Remember that the tool has to work for all circumstances, so help users learn to flex depending on the message and the audience.
  • A brand voice can unite your employees and change the way you work for the better.  Invest in training for all stakeholders and partners—and emphasize the importance of using the voice every day. In our experience, when leadership is really behind the implementation of the voice, that’s when it becomes a company-wide habit that affects the way work is done.

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FINAL THOUGHTS

Brand voice is not a trend. Brand purpose is not just a mural on the wall behind reception. As we see in today’s ecosystem, when they are real and true and prioritized, these tools enable companies to express themselves with strength and resolve.

Then, when a crisis hits, there’s no need for soul searching. There’s no need to panic. The only thing to do is to let the purpose guide and the brand voice do its work, enabling messages and responses that come directly from the company’s core. And, in times of chaos and uncertainty, those are the voices we hear most clearly—and the voices we desperately need.

Learn more about Prophet’s verbal branding work and start using communication tools to express your brand and business strategy. 

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Four Priorities for CMOs to Reimagine and Reignite Marketing

Stoke growth by building at two speeds, feeding every initiative with a continuous stream of customer insights.

Even before the pandemic, chief marketing officers had been navigating a complex and shifting digital landscape. And due to COVID-19, according to Gartner 76 percent of marketing leaders expect to be working with drastically reduced budgets. While some may view that as a doom-and-gloom scenario, we see it as an opportunity.

The CMO role is more important than ever, playing an essential part in guiding companies as they respond, reignite and reimagine themselves in a post-pandemic world. Here are four shifts we see as urgent priorities for CMOs today:

1. Accelerate Digital Transformation

Marketing leaders have long known, of course, that customers are shifting to digital across the entire journey. But the resiliency and dexterity shown during stay-at-home orders provide dazzling proof that customers are ready for much more than they’ve been given credit for.

The current disruptions in all parts of the value chain create breakthrough opportunities for digital to drive success in marketing and customer experience. They can stoke demand, build relationships, optimize customer data and predict channel shifts.

Yet many digital transformation efforts leave CMOs outside of the decision-making circle. The upcoming State of Digital Transformation report from our Altimeter research team finds that CMOs only “own” 4% of digital transformation efforts. CMOs can play a greater role by supporting the corporate digital transformation agenda in any manner they can.

2. Continuously Fuel and Feed Customer Insights

To determine how to win, CMOs need to understand their customers’ needs–and accept that much of what they used to know is no longer true. Continue to collect and use customer data to augment existing market research, address market uncertainties and go one step further to create an insights engine. Look for new ways to capture more information on how customers and intermediaries are feeling and behaving. That intelligence will add value not only in marketing but through the entire enterprise.

Nike is a powerful example. While it built its reputation with great products and relevant marketing, business growth is powered by digital insights that it embeds into every part of the company. Its Nike Direct division hasn’t just fueled sales. It provides data on fast-changing tastes and preferences, informing decisions in everything from innovation strategy to product design to community building. And it’s led to breakthroughs like the Nike Fit app and the 30-day wear test.

3. Build at Two Speeds

To succeed, CMOs need to throw themselves into two-speed thinking. First, they must adapt and innovate marketing and sales to meet the short-term realities of business in this radically disrupted environment, while also planning for things that drive return in the long run like purpose and customer experience. The second speed requires reimagining different scenarios and which bets will be successful. Armed with customer insights and investments in digital, it can be done.

“Even as the world waits for a “new normal” to emerge, reinventing marketing for immediate challenges looks different for each company.”

Even as the world waits for a “new normal” to emerge, reinventing marketing for immediate challenges looks different for each company. According to our State of Digital Transformation research, the majority–64%–of companies say revenue has fallen since the pandemic began. And for 15% overall, the drop is significant. For these companies, marketing is all about restarting the engines. But a lucky 17% have seen revenues increase. And while that’s nice for now, they face short-term challenges in retaining those new customers.

Starbucks has been perfecting the art of operating at two speeds. Short-term, it is taking advantage of its mobile app and loyal base to keep relationships and drive growth. For the longer term, the company is revising the experience for both customers and employees, investing in new drive-through stores, pick-up windows and better machines. All will allow Starbucks to continue to increase and meet demand.

4. Re-Define and Re-Execute your Brand Purpose

Purpose, a brand’s reason-for-being, means so much more today, as consumers demand better corporate behavior. They want to buy from ethical companies that are trying to do the right thing. They expect businesses to be empathic, responsible employers–and recent events have shown us they are willing to walk away from brands that mistreat people. And while they’ll forgive many missteps, they expect transparency.

Amazon, for example, has come under shareholder and employee fire for its refusal to disclose how many workers have contracted COVID-19. In response, the company went beyond mere words, committing an astonishing $4 billion–about a quarter of its annual profits–to make Amazon workers safer and fulfill its mission.

“Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention and money,” founder and CEO Jeff Bezos says in its statement. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small.”

It’s not enough to be trust-worthy. Consumers expect companies to make an impact on society. They want assurances that the brands they buy are protecting people’s health and the environment. And they want to see them promoting social change, such as addressing racial bias. Procter & Gamble, for example, had already established itself as an outspoken advocate for social justice. As a result of recent protests, it stepped up its commitment with a $5 million pledge and compelling new content in its “Take On Race” challenge.

Building a New Action Plan

To act on these new priorities, recalibrate marketing plans. Accept that these are no longer annual documents, but works-in-progress to review monthly, if not weekly.

Make sure plans…

  • Get ahead of budget cuts. Do more with less, re-evaluate marketing ROIs, setting up more frequent reviews to challenge assumptions.

But more importantly…

  • Show marketing as a value creator. How can marketing contribute to the organization versus being seen as a cost center? How can it use brand purpose to increase relevance?
  • Create or recalibrate a continuous customer insights engine, to understand shifting customer needs. How and when should the CMO initiate new market pulsing?
  • Ensure the production of intelligent content, relevant to the moment, contextualized for the consumer.
  • Make sure operating models can execute data-driven test-and-learn efforts.
  • Audit the marketing technology stack to make sure the best moves are automated.

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FINAL THOUGHTS

It’s still too soon for any CMO to predict the months ahead. A vaccine could change the landscape, as could a second or third wave of infections. But planning for the known unknowns–and building in good behaviors now for marketing teams–will help ensure success over future horizons.

Are you setting the right priorities for business growth? Reach out now to chat with our experts and get exclusive insights into the work of other marketing leaders.

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Winning in the Post-COVID-19 World: Trends Here to Stay

Employees yearn for more meaning at work and customers are looking for brands they can respect and admire.

In the talk themed “Winning in the Post-COVID-19 World,” I reflected on what changes prompted by COVID-19 are likely to persist and what strategies and programs winning organizations are likely to employ, drawing from the books Aaker on Branding, Creating Signature Stories and Owning Game-Changing Subcategories.

There have been a host of changes in human attitudes and behaviors that have been stimulated or more frequently accelerated by COVID-19.  Many of these will persist, some at a high level, and will affect the strategy options for many industries.

Here are the changes that are here to stay beyond 2020.

1. Search for meaning in life and work.

The virus has prompted many to reevaluate their life and work and assess what is really important. The result is often a realization that their hopes and time allocation need to change to elevate what is truly meaningful and rewarding to them.

One implication is that it is more important than ever for organizations to have a higher purpose that engenders inspiration among both employees looking for meaning at work and customers looking for brands they can respect and admire. A higher purpose can be offer-driven (we make insanely great products), culture-driven (our students and faculty have confidence without attitude) or social/environmentally driven (Avon walk for breast cancer; Unilever’s Sustainable Living Plan)

2. Need for social connections.

The shelter-in-place world made even more vivid what is universally known and true, that for most people, social interaction and connection is a valued and, indeed, a necessary part of human existence.

“It is more important than ever for organizations to have a higher purpose that engenders inspiration among both employees looking for meaning at work and customers looking for brands they can respect and admire.”

That means that brand communities will be even more valuable to both people and brands. A brand community is a group of people that share involvement in an activity, issue or interest area with a brand as a focal point.  Examples are the Harley-Davidsons HOGS (motorcycles and rides), Etsy craft makers (how to make and market crafts), Sephora Beauty Insider (talk, be inspired and get advice about beauty).  They all provide opportunities to interact, connect and belong to a group in addition to providing the brand with a strong link to a committed customer base

3. Valuing trust and authenticity

The importance of earning trust in brands and institutions, which has been eroding for well over a decade, was reaffirmed in the days of the pandemic and surrounding events.  In this context, being able to communicate in an authentic, trustworthy way becomes critical. That means that stories must play a more important role because facts by themselves are not effective communication vehicles and often do not suggest trust or authenticity.

Stories, particular signature stories that “Wow!” and communicate a strategic message, are more able to communicate values and programs that engender trust and authenticity.  When well selected and presented, they will attract attention, change perceptions, distract from counter-arguing, affect behavior and be authentically remembered.

4. Acceleration of change

There were a host of changes that were underway before COVID-19, like working from home, the use of remote conferencing, concern about health and safety, the rise of e-commerce and the power of social media. But all these trends and more have accelerated as has the level of market dynamics. It is increasingly problematic to assume that future business will look the same as the past and that a “my brand is better than your brand” marketing strategy will work.

Strategically, there needs to be a realization that the best path to growth is now owning new subcategories that change the customer experience or brand relationship. The first task is to find or create a compelling set of “must-haves” that are valued by a core customer group. The second is to become the new subcategory exemplar brand that positions, scales and builds barriers.

On May 22, 2020, David Aaker shared these insights with a live audience of 180,000 in India at the MastersSpeak series sponsored by Future Generali, a major India Life Insures Company.  To learn more about creating subcategories that drive uncommon growth at a time of disruption, pick up a copy of his new book, Owning Game-Changing Subcategories: Uncommon Growth in the Digital Age. It is available wherever books are sold.      

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FINAL THOUGHTS

As the world moves through the pandemic, marketers must stay alert to the zeitgeist. Many of these changes–especially the need for human connection,, the search for meaning and comfort with the ramped-up pace of change–will be with us for some time. Brands should respond accordingly.

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