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Bringing Trust Back to Barclays: When a Strong Social Purpose Pays Off 

Not all brands create purpose-led products. Winning in the purpose era sometimes means using branded signature social programs.

There is a general acceptance that an organization’s effective social effort should also boost business, but many suggest that the route to winning in the purpose era is by directly helping society through efforts like manufacturing wind turbines, distributing healthy food or saving costs from reduced energy use. The problem is that few companies make wind turbines or offer organic food, and energy use goals over time become less and less dramatic in part because incremental progress gets harder.  

An alternative is to use branded signature social programs, whether internal or through a partnership with an external nonprofit, to advance the brand driving the business by providing energy and visibility, an image lift, and engagement opportunities for employees and other stakeholders.  

A reasonable question that comes to mind—can a signature program truly help a business that may not be closely related to the program? There is research in psychology and elsewhere that supports the belief that elements of an admired social program can affect the perception and liking for the sponsoring brand. However, more definitive and rare evidence comes from brands that have demonstrated the impact of a signature social program on a brand in the field. An example is Barclays, that conducted what is termed a “before-after: experiment,” where relevant measures such as perceived trust are taken before the “treatment,” in this case the communication of stories around new social programs and compared to those same measures after.  

Barclays is a role model for how to use branded signature social programs to regain trust, a key brand dimension in the financial services industry. The Barclays brand was damaged by the 2008 financial crisis with accusations that Barclays had manipulated key interest rates. In 2012, the trust level for Barclays in the United Kingdom was well below that of its competitors despite several years of PR and advertising arguing that the “new” Barclays should be trusted. It is not a stretch to conclude that Barclays was one of the least trusted brands in a heavily mistrusted sector in the U.K., Needing a restart, Barclays created a new brand purpose: “Helping people achieve their ambitions—in the right way.”    

The 140,000-employee base was encouraged to create programs responsive to the new purpose. Dozens of programs emerged. The Digital Eagles was created by a 17-person employee group (a decade later the team had grown to 17,000 employees) with a mission to teach the public, especially the older cohort, about surviving and even thriving in the digital world. Stories about how the Digital Eagles and other programs affected real people helped shine a light on the social purpose initiatives at Barclays. 

One story featured Steve Rich, a sports development officer, who had lost his ability to play football (soccer to Americans) because of a car accident. However, he could participate in “walking football”—usually played with a six-person team on a small field with no running—and again experience the joy of the sport. Wanting to help others do the same, he decided to raise awareness of walking football and turn it into a nationwide game in Britain. With the help of the Digital Eagles, Rich created a website that linked over 400 teams across the country and connected individuals with teams. It was partly responsible for the growing interest the sport has generated, the emergence of a national tournament, and the ability of people to connect with former football mates. His accomplishments and personal regeneration are inspiring indeed. 

Employees were inspired and energized by the programs driven by Barclay’s new higher purpose. And customers and prospective customers changed their perceptions of the brand (as reported by the Edelman Financial Trust Barometer for 2014 summarized in the WARC Study noted above). Two years after the emergence of the signature stories, such as those involving the Digital Eagles, trust in Barclays was up 33%, consideration was up 130%, the emotional connection was up 35% (versus 5% for the category average) and “reassurance that your finances are secure” was up 46%. The new campaign drove six times as much change in trust and five times as much change in consideration as the descriptive “this is the new Barclays” campaign that preceded it. In addition, Barclays received 5,000 positive mentions in the press.  

Barclays vividly demonstrates that a signature social program such as the Digital Eagles can lift a brand and is uniquely capable of doing so. There is little doubt that a sharp increase in trust and consideration means an increase in loyalty and even the size of the customer base. Barclays explicitly observes in the 2021 Barclays PLC Strategic Report that offering a complete menu of services to customers is dependent on the earned trust attached to the Barclays brand. The further implication is the Digital Eagles will be supported over decades because its impact on the Barclays brand makes the program a business asset.  


FINAL THOUGHTS

In the purpose era, trust is an even more valued attribute and, when lost, it is hard to earn back. Barclays demonstrates that communicating different intentions and programs does not move the trust needle. But the right social purpose and program such as the Digital Eagles told with emotional stories can climb the hill.  

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Leaning into Leadership: A Conversation with David Novak

In this Leaning Into Leadership blog, Amanda speaks to David Novak.

David Novak

David is a Senior Partner and co-lead of the Marketing & Sales practice. At Prophet he helps clients think about who their customer are currently, who they could be, and to reach them with the right experience, messaging, offers and promotion to drive customer acquisition and retention strategies. More importantly, he helps clients learn how to get really good at customer strategy development as an ongoing capability, not just a one-off exercise. In addition, David works directly with CMOs to help build modern marketing organizations that are customer-centric, build relevance and unlock uncommon growth.

Amanda Nizzere: What’s one professional skill you’re currently working on?

David Novak: Storytelling. Even though I’ve done a lot of storytelling throughout my career, it’s a skill I’m continuously building. At IBM iX it was translating the story of technology, and the promise of what technology and digital can do for companies into business needs and context. At Prophet, it’s helping companies understand the depth and breadth of our capabilities to help them drive growth in meaningful ways. Regardless, it’s a skill I’m always striving to improve. Luckily, we have a lot of amazing storytellers at Prophet, so I have many people to learn from.

AN: Who has influenced you most when it comes to how you approach your work?

DN: I had a boss named Neil Gaydon that I worked with at Pace. He told me, “Don’t bring me a problem without a solution.” I’ve integrated this into all my work. I’ve used this both with clients, in terms of bringing solutions to challenges or obstacles, as well as internally around where we want to focus and what we can offer to potential and current clients. It’s all about identifying the problem, but quickly moving to solutions and impact.

AN: How do you prefer to start your day?

DN: For the past year I’ve purposely woken up early and started a consistent exercise routine. This allows me to eat breakfast with my high school aged kids and then start the day. I’m really enjoying this new habit to start the day.

AN: What was your first job?

DN: I was a shoe salesman at Sears. It was literally my first job. I wasn’t good at it, and it was also embarrassing. I lived in a small town, so all of my friends would come in and heckle me. But my second job was at Popeye’s. I guess you could say this was my first, real, lived “brand experience”, due to the fact that I was literally wearing the Popeye costume to drive traffic to the store.

AN: What led you to this career? 

DN: First, I love what I do. My dad worked for the Department of Defense designing navigation systems. He is the smartest man I know. (Seriously – we would do practice tests for the SAT, and he wouldn’t get a single question wrong.) He loves math and thought I might get into high finance for business, but to his dismay, I am the exact opposite. Finance wasn’t my thing, so I started trying other things. I took a Marketing 101 class and was hooked from that day forward. I really loved the agency-type classes I took in college, but I’m not super creative. I found a nice niche in the data, marketing and technology space. And again, I love where I’ve landed.

AN: What energizes you at work?

DN: I love to win. But it’s not about winning the work. It’s about winning the trust of a client. They trust you to solve some of their biggest challenges. And to see the work in market, contributing to my life, my family’s life and see it having a meaningful impact is really energizing.

AN: If you could snap your fingers and become an expert in something, what would it be?

DN: Back to the advertising point – I really want to be creative. So painting and/or sculpting would be it.  I would love to find an outlet for creative expression.

AN: What’s one thing you’re currently trying to make a habit?

DN: Exercise is a habit I’ve become successful at, but professionally, making time between calls for in-person interaction. Now that we are heading back into the office, I want to create space for purposeful time with people and make connections. Prophet is full of unique people with very interesting people and backgrounds and I want to get to know everyone (again).

AN: If you could trade places with anyone for a day, who would you choose?

DN: This feels like a real Bro-ey answer, so bear with me. But I would meet Elon Musk. And it’s because the areas he’s involved in are so varied. I think it would be so cool to one minute be building a car company, and the next, a rocket ship to the moon. I would love to see how he manages his day and his time. See his prioritization, and how someone that complex manages his day and to-do list.

AN: If you had to pick one age to be permanently, which age would you choose?

DN: 25. Nothing cool happens between 25 and 50 in terms of badged milestones. At 16 you can drive; at 18 you can vote and join the army; at 21 you can drink; and at 25 rent a car. After that, nothing (until 50 and you get your AARP discounts).

I’ve included a new feature in this article, and from this point on, called “Rapid Fire” where people answer a series of short questions they’ve never seen before. David’s answers follow:

Rapid Fire

  • How are you uncommon? I find humor in everything. I think 99% of everything is funny.
  • Do you have a hidden talent or claim to fame? My claim to fame is that I have no talent.
  • Favorite day of the year and why? St. Patrick’s Day because it’s a holiday centered around drinking.
  • Favorite place in the world? Dublin, Ireland. See above. (Also, there are many great storytellers in Dublin.)
  • What is one thing in business that no one is talking about but should? Gift cards. This is an industry-wide problem. They are the one thing that is less valuable than when you bought it, they are limited, and they have an expiration date. This needs to be fixed.
  • What charitable initiatives do you support or are you most passionate about? Local charities that help with homelessness and hunger like Feeding America.
  • What’s a wish you have for the future? I want a marketing-themed meme generator.

About the Series  

Throughout my career, I have been fascinated with the building blocks of leadership, from motivation, coaching and communication to mentorship, empathy, inspiration and more. Unraveling and understanding what makes a strong and impactful leader tick can help each of us implement new strategies to grow as individuals and leaders ourselves. Over the years, I’ve listened to podcasts, read books, attended conferences, and listened to TED Talks about various leadership topics, but some of the most impactful lessons and pieces of advice I’ve learned have been from those around me—my mentors, colleagues, and industry peers—which led me to create this interview series. I invite you to join me as I interview various leaders in my network to share new tools and wise advice from them that you may just want to add to your own leadership toolbox.   

See past Leaning Into Leadership articles here.


ABOUT DAVID NOVAK

David has been at Prophet for 3 years after spending 10 years with IBM iX, guiding Fortune 250 clients in implementing powerful marketing capabilities including mobile, social, machine learning, artificial intelligence and augmented reality. He specializes in helping clients uncover and activate powerful marketing technologies including mobile, social, artificial intelligence and augmented reality. He has worked with leading brands like Apple, PepsiCo, Sephora, Kraft, Kohl’s, United Airlines and more. Interested in talking to David? Contact him here.

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Future Back Planning: Maximizing Future Growth Opportunities 

Future back planning is key to unlocking uncommon growth during times of economic uncertainty. 

Future back planning is key to unlocking uncommon growth during times of economic uncertainty. 

In our latest global research report, Building Business Resilience Through Innovation, we found that a leading barrier to increasing innovation efforts is that the organization lacks a long-term planning process. Unfortunately for many companies, this has only worsened in the last few years as reactive thinking characterized by the pandemic era.   

As innovation leaders emerge from this reactive phase and begin to chart out the next few years of growth during a time of great economic uncertainty, it is essential to create a growth strategy that spans these three-time horizons.

Across these horizons, there is an inverse relationship between the investment in resources and the investment in strategic decisions. Running the business of today is resource intensive and requires operating with excellence with much less space for strategic exploration. In contrast, exploring the business’ target destination over the next five to ten years within a wide open divergence environment is time intensive. Due to the scarcity of resources, it often requires time-bound investment to collect data on the most relevant drivers of change, model potential scenarios that could unfold over time, and based on that, determine what new opportunities are worth further validation and investment.  

In Horizon 1, the existing value chain is used to optimize and scale the business, but in Horizon 3, the needed value chain will most likely be adjacent to today’s value chain. The inversion point of building the new value chain is challenging to manage because resources are ramping up as the ability to make strategic decisions is fading. At this point, the skills required to be successful change. It is operationally complex to get something to move through the inversion curve.   

If a business neglects Horizon 3 activities today, it sets itself up to be leapfrogged by the competition because it will not have invested in the assets and capabilities needed to act on emerging opportunities.

Future Back Helps Companies Maximize Growth Opportunities in Horizon 3  

While it is impossible to predict the future, market leaders and makers proactively anticipate preferred and disruptive future scenarios. The first step is understanding the most impactful drivers of change that will shape the future market landscape. Drivers of change come from a range of sources: the classic Porter’s Five Forces of suppliers, buyers, new entrants, substitutes and competitors that determine industry profitability, as well as macro-forces that are broader than industry boundaries, often categorized as social, technological, economic, environmental, and regulatory drivers (STEER).  

From doing future back work across industries, we have found three non-mutually exclusive factors that help us see around corners. Across these factors, emerging technology is critical in reshaping societal norms, enabling new interaction modes, and determining future profitability and competitive advantage sources. 

3 Non-MECE Factors that Shape the Future Market Landscape 

1. The Overton Window describes the range of policies that are accepted by the mainstream at a given time and can be used to identify ideas on the threshold of gaining mainstream acceptance. For example, over the last 50 years, public acceptance of in-vitro fertilization (IVF) has rapidly increased as the availability of IVF technology has also grown. In 2021, fertility support startups raised $345M, up 35% from the previous year. Health systems and payors that anticipated this shift ten years ago were able to differentiate themselves within a rapidly growing market. However, with the overturning of Roe v. Wade, societal progress regarding IVF is now under threat. Industries heavily funded by the government, such as healthcare and clean energy, are also strongly shaped by changing societal norms. 

2. Behavioral shifts often emerge due to technological advancements that make it easier to do more with less or create new modes of interaction between humans and machines. For example, Figma’s significant innovation was being browser-first, with the ability to edit files in real-time in the cloud, allowing teams of developers, designers, and product managers to collaborate in one place efficiently.  
 
Adobe was late to the game of browser-first collaboration and, as a result, paid $20 billion to acquire Figma, which had roughly $400M in revenues at the time. The steep price was considered a solid investment given the future value of Figma’s product spaces. Thinking more broadly, technological advancements across the Internet of Things, artificial intelligence, artificial and virtual reality, and autonomous machines will enormously impact behavior and interaction modes, changing how we learn, work, collaborate and entertain ourselves.  

3. Business model shifts are often required to capitalize on or meet emerging technology demands, regulation, the economic environment, and ESG agendas. For example, Fundrise was the first company to crowdfund real estate investment successfully, and the founders did it by seeking the expertise of regulators from the beginning. Working with a former regulator, Ben Miller figured out how to use Regulation A to raise money from non-accredited investors, which was the first time anyone had ever done. Eventually, the regulation changed to Regulation A+, which allowed the company to raise more equity from non-accredited investors while streamlining the filing process. Still, at that point, Fundrise was already the category leader in a new market.

Four Questions to Determine a Company’s Options within the Future Market Landscape 

Once we understand the most impactful drivers of change, the next step is modeling the most viable opportunities for a specific company to pursue. We begin with four questions:  

1. How is a company encumbered and advantaged?  

This includes understanding a company’s options based on its funding and regulatory moats. Firms funded by unregulated capital have an entirely different set of options than firms funded by regulated capital. A venture capital-funded firm can take on much higher fixed costs to stand up a new capability without a near-term path to profitability. For example, the data cloud company Snowflake raised $2.1B over eleven rounds of funding since 2012 and isn’t expected to reach profitability until 2023.    

On the other hand, an advantage of being a large, publicly traded company is that it is easier to find suppliers and partners to test and validate Horizon 3 growth hypotheses with and bring new offerings to market. Along with understanding the implications of funding sources, it’s essential to know where margins come from today – is it from hardware, software, or services? Who has the most power in the value chain to extract more margin over time? What parts of a company’s existing product line, assets, and capabilities might serve as a moat? Does it have access to a rare resource on the supply side or a lock-in effect on the consumer side? Finally, is there a regulatory moat that will make it difficult to unseat an incumbent?   

2. Who has the preferred position in the market to launch and scale this idea?  

The most critical mindset of future back work is humility. We always assume that another player is better set up to execute an idea. The big four (Alphabet/Google, Amazon, Apple, Meta/ Facebook) dominate their innovation ecosystems due to their scale, network effects, and ability to buy entire markets. Firms operating within these ecosystems are often unlikely to win share-of-wallet among end consumers and are much more likely to succeed by playing a critical infrastructure or support role. We look at the role of aggregators and integrators in the innovation ecosystem to understand how parts of the market are consolidating and where technology is being abstracted away from the end user.   

3. Who is the player that can shut this idea down? 

As Archimedes said, “The shortest distance between two points is a straight line.” In highly regulated industries such as financial services and healthcare, a significant source of Horizon 3 growth is creating new business models based on the changing regulatory landscape. Like the Fundrise example, the founder of Coinbase realized that abiding by U.S. law rather than moving offshore could act as a long-term defendable moat for the company. With the collapse of FTX, that bet has already paid off.   

4. What has prevented this idea from being launched and adopted before? 

Is the idea on the threshold of becoming mainstream? Is there a consumer experience problem or a price-to-value problem? Or does capital not think it’s worth an investment? The inevitable endpoint of markets is to solve consumer problems rather than business and technical problems. Enterprise capital is good at solving Horizon 1 business problems, such as increasing conversion in existing channels, creating efficiencies, and increasing margins.  

On the other hand, venture capital is good at investing in long-plays that create new consumer markets because it has a risk appetite and is willing to be too early. Too early might mean taking on the cost of educating the market about a problem that they should have realized could be solved. For example, Netflix was loved for eliminating late fees (a consumer problem previously considered unavoidable in a physical rental market). Still, the company was perceived as shifting to a digital-first business model too quickly. Success in bridging the gap between its Horizon 3 digital-first business and its Horizon 1 DVD rental business required subsidizing the price of the new service for end consumers.   

The Mindset We Bring to Future Back Work 

The future back process combines design methodology (outside-in and hypothesis-led) with business rigor (commercial opportunity assessment with an asset-forward view of value-chain adjacencies and potential competitive moats).   

The mindset we apply to this work draws from design and consulting. We’ve distilled it into three design principles: 

Humble 

We begin this work by assuming that another player has a better solution as well as a preferred position in the market.  

Anti-fragile 

We create a durable portfolio of growth moves in order to hedge our bets, with the understanding that it is impossible to know exactly how the market will reshape over time. 

Effective collaboration  

You need to keep running the business of today while exploring what your business might be in the future. At the same time, your hypotheses around how the market might shift and what options are most attractive for your company are the entry point into this work. We design future back engagements to extract maximum input in the most time-efficient way by starting with stakeholder hypotheses, bringing in external experts to identify new opportunities and threats quickly, and then designing workshops and executive communications that bring your team along the right way at the right time. 

The Outcomes We Achieve Through Future Back Work 

There are three main outcomes that we have consistently achieved through this work: 

  1. Board-level alignment and buy-in on a future vision. For example, supporting the approval of a board-level, multi-hundred-million-dollar M&A strategy in order to create an entirely new product category. 
  2. Driving capital allocation for new business building. For example, on a recent project, this work led to a $5 billion acquisition as the centerpiece of a new business unit. 
  3. Updating the product roadmap to transition from now and near-term investments to decisions that will drive the next horizon of the business. 

FINAL THOUGHTS

We would love to do this work with you. If you already have hypotheses on the future of your business, we can dive into a Future Back project to explore, validate, design and quantify those opportunities. If you know that your company needs a Horizon 3 growth strategy, but your leadership team isn’t bought in, we have interim steps to drive alignment among stakeholders while collecting initial hypotheses on potential sources of long-term growth. 

Interested in maximizing your future growth opportunities? Please get in touch. 

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Don’t Ignore Brand During the Banking M&A Riptide 

The next M&A banking wave may be upon us.  What can be learned from past integrations where brand was left in a suboptimal place? 

While there is no crystal ball, slow economic growth and an inverted yield curve continue as headwinds for the banking industry. Both have already exposed vulnerabilities of large regional banks like Silicon Valley and Signature Bank, as well as G-SIBs such as UBS and Credit Suisse. While the speculated wave of consolidation may be overblown, there will no doubt be M&A activity during the foreseeable, uncertain future.   

HBR continues to cite that between 70-90% of acquisitions fail. In addition, MIT Sloan studied 200+ M&As with values exceeding $250M during a 10+ year period starting in 1995 and learned that in nearly two-thirds of those deals, brand strategy was deemed to have a low to moderate influence in pre-merger discussions. This approach leads to the new identity or identities post-merger in a suboptimal place with limited clarity and often stems from a gap in brand expertise during the M&A process and following.  

Specifically, we see five common mistakes related to brand that hinders speculated growth performance and increase costs during and post-acquisition:  

  1. The deal strategy undervalues customer upside and risks: To complete a fully informed financial forecast, due diligence must quantify current and future demand, change tolerance and emerging customer requirements. 
  2. There is limited understanding of purchased brand assets: For a truly shared optimized portfolio post M&A, companies must understand how all brand assets work to drive choice, revenue, and pricing power. 
  3. Integration teams have a narrow framing as primarily a “re-branding” effort: M&A presents a rare, point-in-time opportunity to articulate a new corporate narrative, upgrade customer perceptions and drive lasting cultural change within the organization.  
  4. Integration planning without a go-to-market plan to win: Integration priorities should pair synergy plans with growth moves: product, service and experience innovation to drive growth through the new asset base. 
  5. The new enterprise under-leverages culture and employee engagement: Successfully informing, engaging and enabling employees BEFORE launching externally is critical to retaining human capital and driving cultural engagement. 

As inevitable market forces drive sustained or increased M&A in the banking industry, new and exciting opportunities emerge. Here are three practical things to consider that relate to your brand (and business) during M&A:  

  1. Consider customer context early and often: Ensure all functional discussions include conversations around customer impact and set a precedent that addressing the customer impact and experience is a priority. This is especially true at retail banks, often built around specialized customer focuses or geographic footprints with entrenched identities.  
  2. Evaluate the value and values of brand assets to guide the right transition plan: Typically, fewer stronger brands win out in banking. While long-term efficiencies exist for consolidating brands, careful work must be done to explore different end-states and migration scenarios. Perform the right evaluation ahead not just to understand the brand’s value, but also the inherent values the brand holds, and the customer perception to guide the right transition plan in context.  
  3. Discover or rediscover purpose and power it through culture from within: Banking consolidation done wrong can feel like a mismatched transformer coming together with messy operating model discussions and integration cadences that unfold over time. This can be especially distancing for distributed employees working in branches or regional offices closest to the customer. Investing early in the process to better understand and sharpen a combined new culture with a more meaningful purpose can serve as a North Star for smoother and more engaged integration.  

FINAL THOUGHTS

Despite certain leading indicators, it will be hard to predict exactly what will happen with M&A in the banking sector. However, we can learn from the past in some capacity through the diligence and integration process to better predict the future, learning about the importance of brand as a critical consideration in the process.  

For more information on capturing greater brand and marketing value through M&A, please contact us today. 

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Connecting the Dots Between Innovation and Resilience: 4 Learnings for Companies in China

Companies in China believe innovation and resilience are connected but they experience strong tension. Read more on how to overcome barriers. 

Investing in both innovation and organizational resilience are two essential elements of success for companies to compete in today’s rapidly changing world. Through interviews with 14 senior executives and surveying 300+ innovation experts across the globe, Prophet’s latest research explores how successful organizations use innovation to drive business resilience.  

Four Learnings for Companies in China to Build Innovative Organizations 

Our findings reveal that innovative companies are more likely to be resilient. Particularly, 60% of respondents in China agree that innovation and resilience are connected, more so than their counterparts in Singapore (48%), the U.S. (47%) and the UK (47%). However, there exists a strong tension between the two characteristics – while Chinese companies on average deploy more innovation tactics compared to companies globally, they also face more pronounced barriers. In this article, we share our key findings and explore implications for Chinese businesses seeking to drive sustainable growth through innovation. 

1. Prioritize Cross-Functional Alignment 

Incubation programs and pod-like team structures have long proven to be effective innovation tactics and are widely adopted by companies in China. According to our research, 35% of Chinese respondents report that their companies have a formal innovation incubation program compared to 21% of respondents globally. Additionally, 27% of Chinese respondents report their companies use pod-like team structures vs. just 18% of respondents globally. However, such team structures risk becoming siloed. A lack of cross-functional alignment remains a significant barrier to innovation and growth, with 44% of Chinese respondents citing it as a challenge compared to only 32% globally. 

One example of how cross-functional alignment can impact innovation comes from the fast-growing beverage brand Chi Forest. As a startup, the company found tremendous success through operational agility, running pod-like teams with product managers in each team leading individual innovation initiatives. However, as Chi Forest grew, organizational inefficiencies emerged due to a lack of streamlined workflows and cross-functional collaboration, causing an overlap of roles and processes. Chi Forest has embarked on an organization-wide transformation agenda to reimagine its operation and business model.  

Takeaway: It is important to implement innovation incubation programs and pod-like team structures, while also emphasizing cross-functional alignment. 

2. Develop Balanced Innovation Incentive Structures 

Incentives are a crucial part of driving innovation, but overly focusing on short-term financial outcomes can hinder success. Our findings show that 56% of Chinese respondents report their companies to have special incentive structures for new business opportunities compared to 30% globally. Yet this has also led to an innovation barrier, where 54% of Chinese respondents say their companies have too much emphasis on short-term financial results compared to 35% globally. 

To empower long-term growth for the company, innovation success should be measured against various objectives beyond financial ROI. For example, Xiaomi has a series of incentive programs to encourage innovation, including an Annual Technology Award that rewards $1 million to an internal engineering project every year, evaluating technology and engineering excellence as well as business impact. The 2022 winner, Xiaomi’s CyberDog team, impressed CEO Lei Jun because the project successfully integrated many of the group’s R&D results and presented new technologies that could be soon applied to other core products. This is a good example of how incentives can be used effectively to drive impactful innovation.  

On the other hand, companies like Pop Mart are facing growing pains. Although the company offers generous incentives, it measures innovation success solely on the creation of new product lines and their short-term sales volumes. As a result, the toy maker is left with a bloated portfolio and hasn’t been able to elevate its brand equity despite years of exponential growth. 

Takeaway: To avoid pitfalls, organizations must develop incentive structures to recognize results, while avoiding overly focusing on short-term financial outcomes. 

3. Guide Rapid Innovation Cycles with Long-Term Vision 

Rapid prototyping and iteration is a common innovation tactic, but past innovation failures and a lack of long-term planning processes can discourage innovation. Our findings show that 31% of respondents in China say their companies use rapid prototyping and iteration compared to just 19% of respondents globally. However, failed past attempts at innovation have limited commitment to future innovation for 40% of Chinese companies compared to 28% globally. Additionally, 40% of Chinese respondents say their companies lack a long-term planning process compared to 38% globally. 

Shiseido’s approach to innovation is a great example of how companies can balance a strong brand vision and rapid innovation cycles. “Shiseido’s ability to have lasting success is in large part due to our dedication to creating the best quality products to meet consumer needs. This dedication to ‘craftsmanship’ is why we don’t blindly follow market trends but rather think critically about how we can further refine our products,” said Carol Zhou, SVP of China Business Innovations & Investments at Shiseido, in an interview with Prophet, “Although we may not always be at the forefront of trends, we have found the right pace to create a timeless brand.”  

Takeaway: Organizations should lead innovations with a clear vision and long-term planning, while enabling rapid prototyping and iteration based on a clear strategic roadmap, to create products that meet both long-term and short-term goals. 

4. Focus on Customer Insights as a Foundation of Innovation 

Creating differentiating innovations and finding emergent subcategories are effective ways to separate yourself from competitors, but paying too much attention to competitors and too little attention to customer needs is a surprisingly common mishap, according to our research. Chinese companies tend to focus heavily on competitor activity, with 40% doing so compared to 29% globally. This is often at the expense of paying attention to the needs of their customers, with 52% of Chinese respondents reporting that a major barrier to innovation for their companies is paying too little attention to customer needs, compared to 37% globally.  

Companies must develop an organizational-wide mindset of diving into customer insights, data analysis, and user testing to identify what customers truly need and want. By doing so, they can create innovative products and services that truly differentiate them from their competitors, making them stand out in the market. Nike has been successful in this regard, with a strong focus on the athlete and understanding their needs driving their innovations. As Mark Parker, CEO of Nike, explains, “Our success has been based on our commitment to innovation and great design, which really in our case starts with our commitment to the athlete – and really understanding the athlete and the insights we get from that relationship. So, we translate those insights into real innovation.” In China, Nike actively deploys a localized digital ecosystem to engage with its customers and understand their needs. In turn, the rich data gathered from these digital platforms continuously fuels its innovation and growth. 

Takeaway: Prioritize a human-centered approach that focuses on customer needs to create truly meaningful innovations. 

Building Innovative Organizations 

Indeed, innovation is not a department, but a collective achievement of an organization, as one innovation leader has told us. Companies should lead with a vision, encourage risk-taking, experimentation, and collaboration across all levels of the organization. This will help to create an environment where innovation can thrive and become ingrained in the company’s DNA. 

What can your company do today to turbocharge innovation? 

  1. Emphasize the importance of always-on consumer insights and deploy the right team and structure as enablement. 
  2. Ensure a holistic view of the market demand landscape, covering both consumers and competition and strategize growth moves and innovation efforts. 
  3. Build a multi-year roadmap with different chapters and cross-functional teams and land the detailed action plan in a short-term/ one-year plan. 
  4. Clarify how innovation initiatives drive business purpose, develop employee value propositions and define incentives accordingly. 
  5. Transform how your innovation team works within your organization to instill agility and collaboration. 

FINAL THOUGHTS

Innovation and organizational resilience go hand-in-hand. Combined with investing in diverse innovation tactics, driving C-suite buy-in, and creating an organizational-wide innovation culture, businesses are more likely to be innovative and resilient, and become more likely to have greater financial success.  

Our research shows that Chinese companies excel in deploying innovation tactics compared to companies globally, however they also under-invest in building long-term resilience. It is crucial for them to close this gap in order to drive transformative growth that’s meaningful and sustainable. 

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A Writer’s Predictions on AI-Assisted Writing

Prophet’s verbal experts share their POV on four trends we anticipate for AI and its future role in content development.

AI takeovers have long been our dystopian fantasy. Except we imagined something more apocalyptic, with explosions, volcanic skies and scarce resources, and the whole thing would be directed by Michael Bay. To our imagination’s dismay, the integration of AI into daily life has been pretty drama-free, taking on tedious tasks like filling in payment details, scheduling, and drafting texts.  

But when ChatGPT showed up, boasting its domination over the written word, writers had questions:  

What will happen to our jobs? What about the sanctity of writing as a labor of love? Is writing really writing if it’s developed by AI? 

While it’s fair to believe AI is overstepping, we also know this is just the beginning. With so much technology of the future already in motion, we can’t deny that a new era for writing, communicating, and knowledge sharing has arrived. Sure, it will take some getting used to, but we’re starting to come around to the possibilities AI presents for writers.  

Kevin Kelly, founding executive editor of Wired magazine and author of The Inevitable: Understanding the 12 technological forces that will shape our future writes: “This is not a race against the machines. If we race against them, we lose. This is a race with machines. You’ll be paid in the future based on how well you work with robots … It is inevitable. Let the robots take our jobs and let them help us dream up new work that matters.”  

Let’s not forget, we’ve been in this situation before: just like typewriters made way for laptops, and typing made way for audio recording, ML and AI will surely help professional writers become more prolific, discerning, and original over time. It might even help aspiring writers gain the confidence they need to get started. 

We’re eager to see what these tools are capable of, and below are four trends we anticipate in the coming months and years: 

From Content Creation to Content Curation 

As AI continues to take on the bulk of content creation, more people will be inspired to distill, edit and provide commentary on existing content. Content creators will eventually be succeeded by content curators. Similarly, strategists, editors, and commentators will become the creative forces brands and media outlets seek as they strive to keep up with the demand for niche and personalized content.  

Podcasting and video will also continue to reign since they provide authentic, undeniably human content built on connection and collaboration.  

Still, employers will need people to operate and monitor AI writing tools, which will naturally position AI prompting, co-writing, and editing as core competencies for employees in communication fields. In the same way that SEO writing matured into a core competency, employers will expect their staff to upskill, and seek employees who can use AI writing tools effectively.  

A Reinvigorated Emphasis on the Craft of Writing  

It’s no secret that the line between writer, content creator, and a guy with a Twitter account has all but disappeared over the last 15 years. AI will exacerbate that issue by enabling people to publish under-developed work faster.  

Fortunately, that will make fresh, high-quality content more valuable and easier to spot. We’ll see more recognition for human-derived work by way of badges next to author profiles—think the esteemed “verified” checkmark used on platforms like Spotify and Instagram. As these new hierarchies of quality become the norm, top-tier writers with the appropriate credentials will be celebrated simply by writing without the help of AI.    

Though, as we continue to explore the power and potential of systems like ChatGPT, we should also remind ourselves of their limitations. For example, ChatGPT is branded as AI, but it’s actually a machine learning (ML) tool operating through algorithms that mimic human intelligence. While it’s mostly impressive, it’s not sentient—and it’s not going to replace human writers any time soon. However, writers should still be actively looking for ways to welcome its assistance in their work. 

Marketers will Happily Delegate Information Gathering to Focus on Creativity and Strategy

With platforms claiming the ability to produce creative company names instantly, many marketers, brand builders and creatives understandably met the launch of ChatGPT with trepidation.  

At first, it felt like a threat to the very nature of the creative process. If it were true that AI could produce original work in a fraction of the time, would naming specialists have any hope for a secure professional future? Fortunately, it only takes a few queries within ChatGPT for that fear to subside. The platform cannot yet replicate the art of persuasive copywriting or effective naming. Sure, it’s fast, but it’s not creative.  

We, however, can take advantage of its superior productivity skills. As we well know, the brainstorming process begins with a clearing of the obvious or “bad” ideas. ChatGPT can help us surface and trash those ideas faster, freeing us to dig deeper, explore new avenues of inspiration and test unexpected executions. Essentially, we can build off what AI can deliver as a first step and springboard to something more distinctly human and original.  

Apprehensive Publications will (Eventually) Come Around 

Despite the current debate on whether to publish or recognize AI-assisted content in any capacity, eventually, we will award work partially written by AI.   

Not convinced? Look at the self-publishing industry. Self-published books, articles, and essays were wholly regarded as less than for years. Self-published writers were pariahs because they didn’t jump through the same institutional hoops as the “real” writers before them. Once thousands of self-published writers found their audiences and made a living doing what they loved, criticism subsided. Public figures shared their work on sites like Medium. Global sensations like EL James (50 Shades of Grey) and Robert Kiyosaki (Rich Dad, Poor Dad) and even some of Margaret Atwood’s early works were self-published. Self-publishing became a welcome professional trajectory. 

It’s of course ironic that with ChatGPT, self-publishing platforms are the ones playing gatekeepers. Medium, Amazon KDB, and Substack are among the publications that have shared formal statements regarding AI regulation, like this one from Data Science: 

“We’re committed to publishing work by human authors only, and we don’t—and won’t—accept posts written in whole or in part by AI tools.”

Data Science

Writers who respect the craft and want to see it upheld at their preferred publications will continue to push for better regulatory practices. Others will celebrate the new possibilities of AI-generated content, advocating for its necessity in today’s content-driven world. Medium is one such publication:  

“We welcome the responsible use of AI-assistive technology on Medium. To promote transparency, and help set reader expectations, we require that any story created with AI assistance be clearly labeled as such.”

Medium 

Over time, the passionate opposition to AI-assisted writing will fade, and we’ll find a place for it in the hierarchy of writing quality. Soon, AI-assisted writing will become as commonplace as publishing your debut novel on Amazon.  


FINAL THOUGHTS

As AI writing tools like ChatGPT continue to mature, people will continue to explore its role in art, culture, content and communication. Though these tools currently present as many pitfalls as possibilities, in time we’ll find this technology will help us shift into a new era as writers, thinkers and collaborators.   

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Addressing the ESG Gap: Reconciling ESG Performance and Perceptions

Identify and address gaps in ESG performance and customer perceptions.

ESG is not just a feel-good initiative – it is a vital part of business and employee engagement strategies that drive growth in a world that increasingly needs businesses to address pressing global challenges.  

Companies face pressure from multiple stakeholders to be more socially and environmentally responsible while being transparent about that progress. While there is a continued push by consumers and employees, regulators and investors are also pushing harder for ESG. The EU now requires companies to publish reports on the social and environmental risks they face (with the US not too far behind). 

As a result, businesses have begun to invest more seriously in delivering against their ESG ambition and targets – aiming to create a tangible impact. But as the ESG focus strengthens, there is often a gap – between how companies perform on ESG, and what customers perceive of a company’s ESG strategy. 

Evaluating the ESG Gap 

The ESG performance vs. ESG perceptions gap is based on two questions: 1) How well is my company performing on ESG? and 2) How do customers perceive we’re doing on ESG?  

The glaring discrepancy between these two questions has fueled the rise of “greenwashing” or “purpose washing” accusations against some companies, while the reconciliation of this gap has generated growth by leaning into customer preferences. As a result, it’s urgent that companies understand and evaluate their gap to maximize their ESG impact and tap into new opportunities. 

Note: Dots represent industries and companies included in the Prophet analysis.

Figure 1: ESG Performance vs. Perceptions example

ESG Performance 

In addition to companies’ internal reporting, a wave of third-party ESG metrics and ratings (e.g., MSCI, S&P ESG Scores) have emerged. These scores measure how well a company addresses and manages risks in the areas of environmental, social, and governance. As a result, ESG scores should provide an unbiased, comparable view of a company’s ESG exposure to guide investors. 

While these metrics aren’t perfect – they often leverage incomplete data and standard measurement processes have yet to be implemented – they provide much-needed visibility to external stakeholders and comparability across companies and industries. 

ESG Perceptions 

ESG performance scores measure what a company is doing across ESG initiatives – it’s another effort to be recognized and rewarded for that investment by consumers.  

While many factors affect brand perception, companies are starting to integrate customers’ ESG perceptions into their analysis as ESG becomes a purchase influencer. For example, products making ESG-related claims averaged 28% cumulative growth over the past five-year period, versus 20% for products that made no such claims. Companies can look at data (like the Prophet Brand Relevance Index ®) to better understand what consumers think of their brands. 

Using performance scores and customer perceptions of ESG, companies can start to understand if they are successfully communicating how their ESG agenda translates to additional value. Alternatively, these metrics can help companies determine if their words are ahead of their actions and if they are at risk of greenwashing or virtue signaling.  

The Framework 

By identifying the gap, companies can diagnose where they are in their ESG journey and the next steps for progress: Are they slow to adopt ESG and need to integrate it into all functions? Are they perceived by customers to be performing well on ESG but not living up to it? Do they have robust ESG programs but aren’t publicly recognized for them? Or are they ESG leaders? 

To better illustrate the gap, we mapped customer perceptions and ESG performance scores, identifying four quadrants that companies may occupy. We will take a closer look at the automotive and retail industries, both of which have organizations that occupy all quadrants. 

Overall, one theme emerges: Companies need to do better on ESG, both in establishing and executing ESG commitments and initiatives and sharing that progress openly with stakeholders. 

Figure 2: ESG Performance vs Perceptions: Automotive Industry

Figure 3: ESG Performance vs Perceptions: Retail Industry

Leaders (HIGH Performance/HIGH Perceptions) 

What this means: Companies here are both performing well on customer perceptions and ESG performance scores. Some of them have found strong alignment between elements of ESG and their businesses. Others have leveraged an element of their business (a product or a component) to build credibility with consumers around an area of ESG (e.g., using recycled or renewable materials in a new product). Overall, these companies are born out of purpose, intertwining their ESG strategies with business strategies. 

Who we’re seeing in this space: This is an aspirational quadrant not characterized by any one industry. The few inhabitants often represent the best of their category, having typically established ESG precedents for their industries.  

For retail (see figure 3), Adidas, Sephora, Etsy, and Athleta live here. Sephora is known for integrating DE&I thinking not only into its internal culture and employee operations but is also committed to ensuring that its products are sourced from diverse businesses. It was the first retailer to dedicate at least 15% of shelf space to Black-owned brands and commissioned the first-ever large-scale study on Racial Bias in Retail to improve the shopper experience.  

What to do if you’re here: Continue to make sustainable and socially responsible products, services, and investments in ESG. By seeking industry collaboration, companies can bring others along on the journey and strengthen the category. But while it’s great to have established leadership, companies here will need to be vigilant and make their leadership positions defensible. Other companies will see the benefit of being known as strong ESG performers and will strive to replace the current leader. 

At Risk (LOW Performance/HIGH Perceptions) 

What this means: This quadrant is characterized by high customer perceptions of ESG in contrast to low performance on ESG. ESG may be well integrated into the brand story through messaging, but there hasn’t been strong progress in delivering on that narrative.  

Some are purpose-native companies that made ESG a core part of their brands, benefitting from the halo effect from their origin story, despite being unable to enact a robust ESG strategy as they scale. Other companies include strong consumer brands with ESG-friendly elements, but company performance on ESG doesn’t match.  

As a result, companies here are at risk of being labeled as “greenwashing” or “virtue signaling” if customers realize the company’s ESG initiatives amount to statements with little evidence to back them. 

Who we’re seeing in this space: Some companies may be unable to scale their ESG performance to align with their words. For example, Tesla (see figure 2), nearly synonymous with EVs as the pioneer in the space, was born out of the purpose to accelerate the world’s transition to sustainable, clean energy. However, despite this clear mission, the company has struggled to make strides in other facets of ESG – Tesla was removed from the S&P 500 ESG Index because of issues of racial discrimination within its workplace. Its CEO is famously outspoken for his anti-ESG rhetoric

What to do if you’re here: Assess where to improve or build strategies to deliver on ESG promises and customer expectations. Commit to bold moves against top risks to show progress and authenticity.  

To avoid widening the gap, companies should evaluate the validity of any explicit ESG claims in their messaging to ensure that they are staying true to their statements. ESG performance should be prioritized over ESG perception building. 

Invisible Innovators (HIGH Performance/LOW Perceptions) 

What this means: Companies here are performing well on ESG but aren’t recognized for their progress by consumers. This could stem from 1) not communicating ESG strategies to external stakeholders, 2) not coordinating ESG excellence with brand and marketing, or 3) believing that their customers might not prioritize ESG when they search for and purchase products. Some companies, like a QSR or CPG food company, might even be plagued by category stigma developed over years of a tarnished reputation. 

We also see more consumer awareness of social and environmental efforts in lifestyle, fashion and entertainment categories – consumer-facing brands that play prevalent roles in culture and identity – rather than functional brands in the appliance and food categories. ESG expectations will also vary by the category of the issue. For example, some customers may think a transportation company should prioritize environmental issues over social issues.  

In figure 1, we see a relationship between low ESG performance scores and low ESG data availability – illustrating that without robust data sets for third-party ratings, companies’ ESG scores will ultimately be hurt.  

Who we’re seeing in this space: When we look at the rest of the automotive industry (see figure 2), there is an intriguing contrast with Tesla. There is a cluster of auto companies including Volkswagen, Mazda and BMW that have higher ESG performance scores but lower customer perceptions of ESG. This illustrates the necessity of not only delivering on ESG ambitions but communicating them well.  

For example, BMW established clear goals such as reducing CO2 emissions by over 40% by 2030 and meeting climate neutrality no later than 2050. Additionally, the company aims to have 10 million fully electric vehicles on the roads by 2030, with all vehicles able to be fully recovered and reused for circularity. However, BMW’s lower customer perception of ESG illustrates that customers don’t know what BMW is doing to leave a positive impact on the environment, potentially leaving environmentally conscious consumers out of reach. 

What to do if you’re here: Companies should build connectivity between their ESG and brand narratives for a cohesive story that touches all stakeholders. They should also start sharing their ESG data more openly to socialize their performance. If their brand is rooted in ESG, then they should follow up with the numbers to support it. 

Companies should increase collaboration between the Chief Marketing Officer and the Chief Sustainability Officer. Shine a bright light on the elements of ESG that consumers care about. If companies don’t know if or what they care about, they need to find out.  

Laggards (LOW Performance/LOW Perceptions) 

What this means: Companies here are underperforming on ESG and are perceived poorly by customers with respect to ESG. This may mean that these companies still see ESG as a siloed function (like Corporate Social Responsibility) in the business. Companies here may also be in an industry where no player is focused on delivering against ESG. Or the company is lagging, relative to its more ESG-progressive peers.  

As a result, there is ample opportunity to establish a strong foundation for growth in all areas of ESG. 

Who we’re seeing in this space: Typically, larger, legacy companies – especially those whose businesses seem foundationally at odds with ESG – may run into these ESG challenges because they are slower to adapt. For example, the apparel and fashion industry (see figure 3) – which is responsible for 10% of human-caused greenhouse gas emissions and 20% of global wastewater – is now scrambling to reduce its environmental impact against the backdrop of the harsh effects of climate change.  

Macy’s is one of the country’s most storied department stores, founded over 150 years ago. As the store looks to set itself up to rectify years of flagging sales, it has turned to ESG to fuel its future. In 2022, Macy’s announced that it will spend $5 billion by 2025 on three pillars of social purpose – people, communities, and the planet – to help shape a more equitable and sustainable future. Legacy companies like this are now realizing that success in the future is tied to meeting the needs of customers and employees, who want the organizations they purchase from and work for to be socially responsible. 

What to do if you’re here: Look for quick wins to establish a foundation for ESG. Try to move performance first, but also evaluate the need to shift perceptions. Start sharing ESG data more openly to socialize ESG performance with stakeholders, emphasizing a commitment to accountability. 

Set an ESG ambition and agenda to identify the next steps to start delivering on their goals. A transformation plan can help outline how a company must change for this new chapter of growth. Additionally, join industry or issue-based coalitions to build understanding, commitments, and relationships. 


METHODOLOGY

ESG PERFORMANCE SCORES: In our analysis, we used 2022 S&P ESG scores to identify companies’ performance on ESG. Unlike ESG datasets that rely simply on publicly available information, S&P Global ESG Scores are informed by a combination of verified company disclosures, media and stakeholder analysis, and in-depth company engagement via the S&P Global Corporate Sustainability Assessment (CSA).  

CUSTOMER PERCEPTIONS OF ESG: To determine customer perceptions of companies’ ESG performance, we leveraged our 2022 Prophet Brand Relevance Index ® (BRI) data. The BRI measures brand relevance – relevance encompasses all the elements required for a strong brand and healthy bottom line, including high demand, strong appeal and products and services that add value to a consumer’s life. 

Prophet asked more than 13,500 consumers in the U.S. about the brands that matter most in their lives today. We measure their relationship to 293 brands in 27 categories, looking closely at 16 attributes. 


FINAL THOUGHTS

Whether you believe ESG is strategic to your company’s growth or that your customers are prioritizing ESG in their purchases, it is vital to recognize and address any ESG performance and customer perceptions gap. Otherwise, your company may miss opportunities to connect with ESG-minded customers.  

The first step to addressing your ESG performance vs. perceptions gap is understanding where your company is today. Once you’ve defined that, the steps we’ve outlined will help guide you toward ESG leadership.

This article is a part of our ESG Performance vs. ESG Perceptions series analyzing the gap between what a company does and what its customers think it does on ESG. Stay tuned for our next analysis featuring our new 2023 BRI data! 

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How ASUS is Building Leadership in Sustainable Technology: A Conversation with TS Wu

ASUS’s Chief Sustainability Officer shares how the brand’s “Engineering Spirit” shapes its ESG strategy.

In the face of increasingly complex compliance requirements and growing economic turbulence, a robust ESG strategy has become indispensable for a company’s growth. While today’s corporations often operate in structured and specialized siloes, a successful ESG strategy requires heightened collaboration across all stakeholders in order to find solutions to complex challenges. In our work, we found that companies prioritizing ESG initiatives often excel at identifying innovative solutions to unlock growth opportunities. 

Global technology brand ASUS has long been an industry leader in ESG strategies and sustainable growth. In 2021, ASUS furthered its efforts by launching the “2025 Sustainability Goals,” committing to 100% renewable energy usage by 2035. As part of this initiative, ASUS worked with Prophet to deepen its ESG strategy and narrative. In January 2023, ASUS released its new ESG slogan at CES – “Sustaining an Incredible Future.” 

Cecilia Huang, a partner at Prophet, sat down with TS Wu, chief sustainability officer of ASUS Group, to discuss how ASUS imbues a strong purpose and ESG strategy into its organizational culture to drive uncommon growth. 

CH: In recent years, the technology industry emphasizes more sustainable growth while confronting various challenges, such as compliance requirements and market shifts. What measures has ASUS taken to overcome these challenges as well as elevate its ESG strategy? 

TW: I have seen in the past few years that societal topics such as environmental protection have become increasingly mainstream, and ESG strategies and organizational resilience are more valued. However, there are still many challenges that businesses need to identify and solve urgently. Externally, meeting compliance standards and consumer demands to remain competitive requires rapid iteration; internally, organizations face issues such as talent retention, innovation, brand building, and profitability. 

In order to meet these challenges and effectively integrate ESG, ASUS has implemented three major initiatives: 

  1. First, from “maximizing the interests of stockholders” to “maximizing the value for stakeholders”: In the past, ASUS focused on maximizing stockholder value. But now, we recognize that for a business to achieve long-term success, it must meet the expectations of all stakeholders.  
  2. Second, from “emphasizing technology” to “emphasizing purpose”: The guidance of organizational culture is crucial. Chairman Jonney Shih has always insisted on promoting ASUS’ “authentic and pragmatic” culture internally. He once shared the book, The Heart of Business by Hubert Joly, former CEO at Best Buy, which advocates for leadership and business that starts from the heart. Such a culture allows ASUS employees to focus less on external awards and recognition and more on the original intent and vision of the company. We have been following this philosophy to garner enthusiasm towards ESG, building our strategy from the inside out. 
  3. Third, from “passively avoiding risks” to “actively achieving sustainable growth”: In the past, our focus for ESG has been on risk reduction and legal compliance. Now we are going a step further, with an eye on brand growth and adapting to the future. We’re working to proactively create shared value through the development of ESG strategies that promote sustainable growth. 

CH: When did ASUS’s commitment to ESG begin? What experiences can you share from what ASUS has learned over the years? 

TW: ASUS has undergone six stages towards developing our ESG strategy.  Starting in 2002 the seeds of ESG were planted at ASUS. Customers began paying more attention to product sustainability. We set up Green ASUS under the Quality Assurance Center to meet the demands of the market and our customers. Subsequently, in 2008, ASUS established the ASUS Foundation to invest more actively in social impact programs in order to improve our corporate image and reputation. 

The turning point was in 2010 when ASUS transitioned from passive involvement into active efforts. We proposed standards for ourselves that were higher than industry regulations and sought to bring more environmentally friendly products to customers, with the aim of gaining a greater competitive advantage and penetrating a broader international market. In 2016, we went a step further and embedded sustainability as a parameter in product design, process transformation, organizational design, supply chain management and other processes, formally incorporating ESG into our strategy. 

Now, based on the existing foundation and achievements, we are exploring how ESG can become an important pillar of our company’s future strategic growth. 

After undergoing the six stages of ESG transformation, we understand how to deal with various challenges and recognize the importance of making ESG a core strategy on its own. By setting up a dedicated department and adding the role of chief sustainability officer, we’ve created a culture that allows different departments across the company to understand the importance of ESG, enables experts to help advise on and implement initiatives, and deeply roots ESG within ASUS. 

CH: You mentioned that ASUS’s leadership places great importance on the original intent of the company. What role do they play in driving ESG across the organization? 

TW: I believe the role of leaders in the early stages of ESG development is far greater than in the later stages. Leaders can guide the organization early on and ensure its implementation is not just a superficial branding project. 

At ASUS, our chairman and CEO both lead by example, personally participating in the ESG committee to discuss ASUS’s sustainable business strategy and philosophy. Employees understand that the leadership greatly values ESG Therefore, each department incorporates ESG accordingly and soon sees the benefits of ESG in building the business, thus forming a positive feedback loop. 

Different departments will invite the sustainability team to participate in their strategic planning with the hope that the success of new products will not only come from new functionalities but also from the sustainable features in product design. To us, this signifies real change. 

CH: ASUS’s “Engineering Spirit” is unique. How does it relate to ESG initiatives? How do the two influence each other? 

TW: “Engineering Spirit” is the DNA of ASUS’s organizational culture, and our ESG strategy is connected to it in two ways. 

The first is data-based measurement and technology-centric management. This means that the benefits of sustainability-related actions can be evaluated and managed through quantifiable indicators. Taking environmental profit and loss assessment as an example, ASUS quantifies the air pollution, water pollution, greenhouse gas, and waste pollution generated throughout the process of laptop computer production. This allows us to understand the environmental impact of suppliers in each segment of the value chain and helps us optimize resource allocation. In addition, this initiative allows us to clearly convey to stakeholders ASUS’s emphasis on sustainable growth and the value it brings to society through real and visible figures. 

The second is design thinking. In this realm, we pursue the concept of “beautiful, practical, and environmentally friendly,” and incorporate products’ design, weight, thinness, and ESG dimensions into product parameters. We resolve conflicts through technology and design thinking to find the optimal solution. 

As a result, the focus on sustainability has permeated ASUS’s product design, process design, organizational design, and supply chain management. Its importance is highly valued at each stage of the process. 

CH: Lastly, in terms of organizational management, how should companies build a better future through improved organizational processes, values, and talent development? 

TW: I believe a shift in strategic and operational thinking is key. While competition is inevitable, a change in mentality is essential. Organizations in the past emphasized the division of labor and efficiency, but ESG-led organizations emphasize collaboration and connection. Therefore, ASUS’s ESG department plays the role of a facilitator and guide across the organization, rather than a commander. We never require other departments to replicate successful cases. Instead, we use them as experience sharing and a knowledge base, so that each team can reasonably choose resources and invest pragmatically based on real business conditions, ultimately promoting sustainable growth across the company. Externally, ASUS also cooperates with other technology companies to launch a Climate Partnership, with the goal of working jointly on issues that cannot be solved by a single company. 

Furthermore, talent is indispensable to ESG.  We do two things to cultivate our talent development. First, we encourage independent innovation. In our organizational design, ASUS gives individuals greater autonomy to foster innovation. Second, we cultivate interdisciplinary talent. We believe that it is very important to develop employees that can coordinate and integrate different domains, especially for ESG-oriented organizations. As an organization, we are committed to shaping our employees from specialists into generalists, connecting fragmented knowledge and creating higher value. 

Finally, establishing values is very important. To quote our chairman: “Long-term profitability is the standard by which the market measures the success of a company. What truly outstanding companies have in common is that they have a clear business philosophy and consistent values, and they know how to communicate with key stakeholders. When an organization can think deeply, redefine the role of sustainability, and use its unique core capabilities to meet the needs of the environment and society, the performance of the company will be even more outstanding.” 


FINAL THOUGHTS

As shown in our conversation with TS Wu, the key to driving a successful ESG strategy to realize transformational growth lies not only in technological innovation and brand story but also in holistic planning across multiple strategic dimensions, including brand purpose, organizational management and collaboration. 

For business leaders, the starting point is to ensure the right mindset that focuses on creating value for all shareholders, building a purposeful business and actively driving sustainable growth. It is important to take a long-term view to transform the organization and culture with a strong purpose. If done right, an ESG-led strategy can align the company and become the central force for unleashing uncommon, sustainable growth. 

Prophet brings its strengths in consumer understanding, business model design, reimagining brands and experiences, and change readiness to help companies take the next step. Contact us to discuss how to build a growth-oriented ESG strategy. 

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Introducing the Innovation Maturity Model for Financial Services

Prophet’s Innovation Maturity Model helps organizations establish and operate high-powered innovation engines.

Innovation – more and more –  is what every financial services company seeks as the primary means of driving growth. That’s true because innovation is increasingly what separates market leaders from also-rans.  

But for all the investments in innovation, most organizations struggle to generate the returns they’re looking for or produce the growth that innovation is supposed to unleash. For more on the barriers to innovation and – more importantly – how to get over them, read our recent research report, Winning the Innovation Game in Banking.) 

In the intensely competitive financial services sector, it is not enough to innovate every now and then. Rather the goal is to establish a rigorous practice of innovation and to make it a standard part of ongoing operations. The vision is to establish a high-performing innovation engine that continually identifies innovation opportunities, explores those ideas via prototyping and gated investments and efficiently moves meaningful innovations to market. Such a disciplined process is necessary to avoid the common pitfalls that make repeatable innovation an elusive target for many companies.  

Introducing… the Innovation Maturity Model 

To help banks, insurers, and investment managers industrialize their approach to innovation, Prophet created the innovation maturity model. This model helps organizations:  

  • Assess their own innovation capabilities and opportunities  
  • Identify the barriers – technological, process, human, cultural – inhibiting innovation 
  • Establish tangible innovation goals and actionable plans to overcome those barriers  
  • Define a roadmap to establishing repeatable innovation capabilities  

The innovation maturity model inspects five dimensions of the business that are critical to enabling innovation:  

  1. Strategy and Vision  
  2. Organization and Mechanics 
  3. Insights and Measurement 
  4. Culture, Behaviors and Rituals 
  5. Education and Enablement 

Within each of these areas, the model defines varying levels of maturity – beginner, novice, intermediate, advanced, expert – so organizations can understand where they are today and what to aim for tomorrow. For instance, an organization with expert-level capabilities in organization and mechanics would involve the entire enterprise in using innovation portfolios to drive strategic directions and decisions, with all employees aligned to the innovation strategy and with specific responsibilities to drive that strategy forward.  

In terms of education and enablement, beginner firms will be those that provide access to and funding for external training for dedicated innovation practitioners. Intermediate firms will have innovation teams in place to help drive behavioral change across the organization and support wider education efforts. At the expert level, innovation training and education will be a mandatory part of onboarding and learning and development programs, with continuously updated curricula and regular use of outside resources for insight and inspiration.  

The innovation maturity model reflects our market experience in terms of what works in driving breakthrough innovations. Further, it’s designed to establish cultures that prize risk-taking and experimentation and instill operational discipline relative to innovation. Such organizations are capable of both acting like a startup and investing like venture capital firms. As we highlight in our report, “Winning the Innovation Game in Banking”, it’s a matter of building a portfolio of innovation ideas based on deep customer insight and then rapidly testing and refining those ideas through pilots and MVP launches into the market.  

The Many Forms of Innovation 

Because innovation can take many forms, our innovation maturity model provides the core insights that can point the organization in the right long-term direction. To put the model into context, consider how the organizations below are evaluating the different ways to set up their innovation engines and flywheels.  

  • Allianz: An ‘Always On’ Dedicated Innovation Center: Allianz has launched dedicated innovation centers to engage a range of partners, including FinTechs, start-ups and firms in other sectors, to develop entirely new insurance solutions for specific industries, including travel and automotive. This looks like a winning strategy considering the pressure on insurers to innovate in the face of intensifying risks from climate change, relentless cyber threats and the growing protection and retirement savings gaps.  
  • JP Morgan Chase: A Condensed Annual Innovation Event:

    JP Morgan Chase fills its innovation pipeline in creative ways, too. It holds an annual Innovation Week, bringing together employees in more than 400 events focused on generating new applications for artificial intelligence, machine learning and other enabling technologies, while highlighting specific business issues, opportunities, and current technology trends. It also held a digital innovation competition to generate transformative ideas to enhance the client and advisor experience. Such broad-based approaches reinforce that innovation is part of everyone’s job.

  • Vanguard: A Culture of Innovation and Commitment to Outside Partnerships: In wealth and asset management, Vanguard has promoted a culture of innovation by empowering employees to drive meaningful change. Further, it’s working with partners, such as American Express, to develop new offerings that give customers increased flexibility.  


FINAL THOUGHTS

Prophet’s innovation maturity model helps organizations design the innovation engine they need based on their objectives, customer base, product set and cultures, as well as to establish the right operational model for repeatable innovation. For more insights, read our latest report Building Business Resilience with Innovation

We’d be delighted to speak with you regarding your firm’s innovation outlook and objectives and how our Innovation maturity model can help you achieve them. 

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2022 Corporate Earnings: Where Do We Go From Here?

Understanding the key drivers of growth and strategies to move forward.

Corporate earnings this season are particularly unique. A global recession, the war in Ukraine, and a virus that is still disrupting normal life are among the many factors affecting businesses small and large, resulting in the first quarterly earnings decline since the onset of the COVID-19 pandemic. 

Leaders are navigating difficult waters as they are tasked with facing the swirl of the macro-economic environment, moving forward from layoffs and identifying new growth opportunities — all whilst budgets are being slashed across industries. Despite this, there are many positive signals stemming from the recent earnings as many leaders are optimistic about a return to normalcy in 2023. 

Prophet looked at close to 100 quarterly earnings results, across varying global industries and sectors, to understand the key drivers of growth, headwinds facing leaders and strategies to move forward in 2023. Here are our learnings on what earnings season could mean as we try to regain balance, agility and growth acceleration in arguably the least predictable time in recent history. 

Top Learnings From This Remarkable Earnings Season

1. No industry or organization was shielded from the impact of a sour macroeconomic and geopolitical environment, with many reactively cutting costs to preserve margins. 

This is a lackluster earnings cycle for most, with “headwinds” as the key buzzword and an average -22% earnings-per-share decline from Q4 2021. In 2022, businesses optimized for pandemic-fueled growth were forced to adjust to a down-market driven by global inflation, foreign exchange fluctuations, COVID lockdowns in China and additional supply chain disruptions.  

As a result, leaders became laser-focused on cutting costs, managing risk and re-evaluating their business model. Banks, for example, are stowing away billions of dollars to protect against rising loan defaults; Harris Simmons, chief executive officer at Zion Bancorporation commented, “We continued to build our loss reserves due to both continued loan growth and the prospect of a slowing or recessionary economic environment in coming months.” Investors are bullish that inflation will slow in 2023, but businesses are managing risk and going lean to prepare for continued pressure. 

2. Despite a harrowing cry that “2023 will be a year of optimization and efficiency”, businesses are sharply committed to returning to growth in 2023. 

While headlines have focused on streamlining costs, the real takeaway from this earnings cycle is what leaders are laser-focused on: improving top-line growth. Many executives highlighted strategies to remain relevant and stay ahead of the competition, such as improving product quality, bringing new offerings to market and investing in customer experience. 

Consumer packaged goods are one of the many industries where executives are investing more in sales and marketing tactics to improve competitive positioning, enhance product superiority, and ensure price increases stick. For example, Mike Hsu, chief executive officer at Kimberly-Clark attributed organic growth in the quarter to “improving our product offering and market positions,” and plans to increase the investment in advertising to “grow the category for the long term”. 

Those who have already been executing these strategies saw unprecedented levels of revenue and customer growth in 2022 — even in a recessionary environment. In fact, Prophet found an 8% average year-over-year growth in revenue for the quarter that ended in December 2022. 

3. Executives are using this downturn as an impetus for transforming their business and reinventing their brand. 

The data is in. Similar to what we saw coming out of the COVID-19 downturn, executives across industries are moving from reactive adaptation to proactive transformation. 2023 has become a fertile breeding ground for brands seeking to drive sustainable, purposeful, and transformative growth. Noel Wallace, chief executive officer at Colgate-Palmolive described how they are betting big on digital transformation as they have now “shifted [their] resources to deliver more breakthrough and transformational innovation” and are confident that, “despite macroeconomic conditions worldwide, we are executing against the right strategy and are well-positioned to deliver sustainable, profitable growth in 2023 and beyond.”  

In healthcare, Eli Lilly & Company is calling 2023 an “inflection point” and “a chance to expand our impact on patients and growth potential as an R&D-driven biopharma company,” and in tech, Amazon is “working really hard to streamline our costs [without] giving up on the long-term strategic investments that we believe can change Amazon over the long term.” While budgets are being slashed, executives are exceptionally clear on the need to preserve investments in firm-wide transformation. 

4. Commitments to environmental, social and governance (ESG) strategies are even more paramount in 2023. 

Pandemic-born ESG strategies were reinforced this earnings season despite a tough macroeconomic climate. Many leaders dedicated time to showing investors how they are measuring up on ESG metrics, such as decarbonization, and activating their investments in the market through new products, solutions and partnerships.  

This is especially relevant given the heightened investment from governments and the private sector in decarbonization, which has the potential to catalyze a mini-boom cycle in the “green” economy. To that end, the industrial sector was particularly vocal on the need to meet “growing customer demand for innovative and more sustainable solutions” (Dow) and “accelerate our transition to a low carbon green economy” (Trane Technologies.) It is clear that economic distress is not enough to dissuade businesses from the imperative of implementing an ESG strategy, especially as consumers are ever more watchful

5. People and teams are imperative to the 2023 turnaround as leaders articulated the importance of building a strong employer brand. 

Layoffs are an unfortunate outcome when growth reverses, such as when the pandemic growth bubble popped in 2022. However, executives are now focusing on the path forward as they highlighted strategies to strengthen their core business, better align operating models to their go-to-market strategy and empower remaining employees. Donald Macpherson, chief executive officer at Grainger commented on the need to “strengthen our purpose-driven culture by ensuring Grainger is a place where our team members can be their true selves and have a fulfilling career”, while Bill Rogers, chief executive officer at Truist pointed to leveraging “our increased capacity, expanded capabilities and talented teammates to actualize our purpose.” 


FINAL THOUGHTS

This is a difficult time for businesses, employees, shareholders, consumers and society alike. Strategies employed in 2022 to protect margins — such as hiking prices or corporate layoffs — are not going to cut it in the long term. Brands are scaling back investments and cutting costs. However, corporate leaders will see this as an opportunity to take advantage of this moment in time to double down in their growth strategies by optimizing their organizational structure, prioritizing brand and demand marketing investments, bringing a strong employer brand to market, and continuing to consider ESG as core to their strategy all while remaining truly customer-obsessed. 

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Top 5 Trends Marketers in Asia Should Expect in 2023

Five marketing trends in Asia to help position brands for uncommon growth this year.

In 2022, companies faced rising costs, continued supply chain challenges, and lasting COVID repercussions, especially with Asia’s more cautious reopening. Despite these challenges, brands found novel ways to adapt to rising trends; creating new products and experiences to surprise and delight their consumers. They reimagined offline experiences, ventured into the Metaverse, and redefined standards for ESG.  

Looking ahead to 2023, we foresee continued pressure for businesses and marketers to perform in the face of sustained uncertainties. But we also see more opportunities for brands to rethink their offerings, double down on customer centricity, and build relevance that lasts – for customers and employees alike. 

Below, we share our thoughts on five trends for marketers to keep in mind as we head into 2023. 

1. Expanding the Scope of the CMO 

The role of the CMO and their team will continue to shift as marketing evolves from a predominantly creative function to an increasingly data-driven one. Effective marketing now requires an increased focus on data-driven decision-making, using analytics and insights to understand customer needs and preferences to develop targeted campaigns that reach the right audience at the right time.  

The proliferation of new technologies has opened up a wide range of opportunities and challenges for marketers. However, to gain the lead, marketers must hone their skill sets and strengthen their analytical wheelhouse as their MarTech stack is growing ever larger and more complex.  

With this expanded remit also comes the need for even closer collaboration between marketing and other departments within the organization. For Matt Che, CMO of Budweiser APAC, a close partnership with the commercial team has been critical to the company’s success in Asia: “It’s important to align across marketing and sales teams on what long-term success looks like as well as what challenges might arise in the short term. Collaborating with sales allows us to better identify commercial realities such as pricing, competition, and potential cannibalization within our portfolio.”  

As brands continue pushing for customer-centricity, marketing can continue to elevate the voice of the customer across all areas of the business to drive uncommon growth. 

2. Building Purpose-Led Brands 

Across all industries, a commitment to ESG is becoming expected, if not demanded, by stakeholders. Consumers, employees, and investors are coming from all angles to hold companies to higher standards, expecting not simply a verbal commitment to ESG but tangible policies and practices that reflect these values. Consumers are increasingly choosing companies that take a stand on issues they care about, with 86% expecting CEOs to speak out on societal issues, according to Edelman. Internally, employees are seeking employers who align with their values, and investors are putting record-breaking amounts of capital behind companies prioritizing ESG. More than ever, marketers must strive to build purpose-led brands that translate aspirational visions into pragmatic strategies that contribute to a more sustainable future. 

As an early adopter of sustainable product design and supply chain management, consumer electronics leader ASUS has long been a champion of ESG principles. To further solidify its leadership in this area, the company had been exploring how to make ESG not just an initiative, but a central pillar of future strategic growth. Prophet was tasked with turning ASUS’s ESG strategy into a narrative that could be communicated to both internal and external stakeholders. Our team delivered a comprehensive ESG brand strategy that included a messaging framework, activation ideas, and creative assets to bring the ESG strategy to life, allowing the brand to socialize its core principles effectively and ensure cohesion with the overall brand strategy across both internal and external stakeholders. This ESG strategy was officially launched in the recent ASUS CES 2023 launch event. 

3. Deepening Post-Purchase Experiences 

As marketers are well aware, the customer journey does not end when a purchase is made. To adapt a true customer-centric mindset, brands must not only convince consumers to choose them, but also pay attention to how their customers use their product or service. As customer acquisition costs continue to rise and channel fragmentation intensifies, customer retainment has become an increasingly important growth driver for brands. Holistic customer experience, particularly when it comes to post-purchase engagement, must not be overlooked. In Southeast Asia, nearly 90% of consumers were more enticed to shop somewhere with a loyalty program. In China, we’ve seen an opportunity gap for marketers to focus more on customer lifetime value to find more sustainable and long-term growth, based on findings from Prophet’s latest research “Brand and Demand Marketing: A Love Story.”  

Many leading brands have started taking steps. Outdoor apparel company, The North Face, wanted to redefine how to deliver its XPLR Pass loyalty program in Greater China to drive higher engagement with Chinese members. The company saw an opportunity to expand the types of benefits provided, going beyond solely monetary rewards to better reflect the brand DNA and further differentiate itself from competitors. As part of the Greater China loyalty program revamp, Prophet developed a unique positioning for XPLR Pass and defined key strategic metrics, data strategy and engagement tactics. This work sets the foundation for the revamped loyalty program to be a key pillar of future growth for the brand in that market. 

4. Meeting Customer Needs Through Demand Landscape Mapping 

Consumers today have access to more information at their fingertips than ever before, making them increasingly sophisticated and discerning shoppers across all categories. As a result, customer segments are becoming more diverse and complex as well, with more variance in mindsets and behaviors. For instance, Asia consumers tend not to be pure luxury shoppers, with 82% of Korean respondents and 72% of Chinese respondents stating that they like to mix and match across premium and mass brands. To develop a brand and product portfolio to meet the nuanced needs of their target audience, brands can leverage demand landscape mapping to understand both where to play and how to win. 

Prophet worked with a leading beverage company to develop its China portfolio strategy based on demand landscape. The company had several local and global brands in the market but wanted to more clearly define the roles of key brands and their anchored demand spaces. By combining quantitative data analysis with strategic insights, Prophet mapped its existing brands to high-value demand opportunities – i.e., specific consumer segment, occasion and drinking needs, as well as identifying key whitespace opportunities for innovation. We further developed clear portraits of priority consumer segments, including holistic understanding of their social context, personal motivations, and lifestyle, enabling the company to better activate the portfolio and brand strategies.  

5. Driving Growth From Within Through Cultural Transformation  

As mentioned previously, workers are increasingly making it a priority to choose an employer that aligns with their values. Organizations know the importance of developing internal branding and communications that are consistent with the external brand, but there’s more work to be done. By taking steps to actively understand and address the needs of their workforce, companies can drive cultural transformation from within. Engaged employees are more likely to be productive, innovative, and collaborative: Within the same organization, highly engaged business units can result in a 23% difference in profitability. In East Asia especially, only 17% of employees report feeling engaged at work (compared with 21% globally) highlighting an opportunity for firms to look inward and close the gap. Whether it’s revamping the company’s values, investing in employee learning and development or driving better collaboration, an engaged workforce is the fuel for a brand’s growth engine. 

Polestar, an electric performance car brand, had aggressive global growth aspirations, with plans to add 50 new spaces and over 700 new employees. With this rapid expansion in mind, ensuring that customer-facing staff were equipped to deliver a consistent customer experience was key. Polestar tasked Prophet with developing a clear customer experience strategy that covered recruitment, training, service, and operations. Prophet created a training curriculum, including eLearning modules, live training events, and self-study exercises, which covered how to tell the brand story, how to respond to customer scenarios, and role-specific guidelines. Prophet’s successful training program resulted in high participation and engagement rates, equipping and enabling customer-facing teams at Polestar to deliver a consistent and differentiated customer experience. 

This article was originally published on MARKETING-INTERACTIVE. 


FINAL THOUGHTS

The game of marketing means always looking ahead to anticipate not only customer needs but also macrotrends, market shifts, and industry changes. Marketers that are able to think proactively, invest pragmatically, and collaborate effectively with their peers will be well-positioned to unlock uncommon growth for their brands in 2023.

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Designing the Employee Experience for the New World of Work

Economic turbulence. Ripples of resignations. Worker power on the rise. To keep up with fast-changing expectations, businesses need to make employee experience a central pillar in their people strategies.

Companies are still struggling to find their footing on the constantly shifting sands of hybrid and remote workplaces. And now, the increasingly turbulent economy further unsettles the landscape, challenging existing employee experience strategies.  

Many organizations are reducing headcount and cutting back on engagement efforts. That’s understandable in the short term, but it’s a mistake to take your eye off the ball completely. Longer term, the war for talent will rage stronger than ever, even if we see a relative truce for a while. The pandemic, the Great Resignation and the demand-driven labor market made people realize that they can choose how and where they work. The mold has been broken and you can’t put it back together. Ignoring the experience elements while the economy slows will only worsen the hiring dilemmas of the future and see the confidence decline of those employees that remain. That means every organization will have to grapple with (if they haven’t already) an employee-centric offering if they are to attract, retain and engage the right talent they need to thrive. 

Through our work as people strategists, psychologists, change practitioners and service and product designers, we have helped clients around the world accelerate their employee experience journeys and studied countless experiments and their outcomes. As one might expect, there is no silver bullet. However, our work has shown that experiences that are desirable to employees don’t have to conflict with what is viable and feasible for the business. After all, maximizing desirability, viability and feasibility (DVF) is crucial for creating a long-lasting, sustainable impact on the employee experience. 

The economic situation may remove the feeling of urgency, but talent will always have a choice about who they work for and in harder times organizations need to motivate and enable their people to perform, even more than usual. Organizations are still entirely reliant on their people and those that accept the reality of employee power and the demands that come with it will reap the rewards in the long term.  

Employee Power is on the Rise 

Over the two years of the pandemic, every type of organization had to quickly test and experiment with countless workplace policy updates to stay afloat. Companies didn’t have time to “wait and see”– they had to create new policies in a few days. In some cases early on, companies saw surprising increases in productivity. In a survey carried out by the University of Chicago, 40% of respondents said they believe they are more productive at home while 15% said the reverse is true. Others reported remarkable gains in employee satisfaction, even reaching record levels. And for those workers reporting greater happiness when allowed to work remotely at least some of the time, over 80% reported an improvement in their work-life balance.

But now this picture has evolved to one of burnout, stress and cultural disconnect. Job satisfaction has plunged to a 20-year-low. Women have been especially crushed by this downside, with education and childcare crises forcing millions out of the workplace, likely setting gender pay equity efforts back for more than a generation. And as the Great Resignation, well underway before the pandemic, continues to make hiring harder, the economy is sputtering. 

The point is, it’s harder to be an employee than it used to be. Economic uncertainty will make it harder still. Organizations need employees to perform, and it creates an even greater need to provide a stable and productive working environment.    

“Employee experience” is a common buzzword that is over-used and ill-defined. For decades, conventional wisdom has dictated employee engagement as the ultimate goal of employee experience. Experts believed that engaged employees are more productive, stay around longer and grow into the leaders of tomorrow. One of the problems with employee engagement is that it is inherently employer centric. Firms want their employees to be engaged with work. But employees crave so much more. They want to be well compensated, valued and connected to a purpose. They no longer compartmentalize their careers and work as separate from their personal lives. They pursue well-being across financial, physical, mental, social and intellectual dimensions. 

The New Equation: Flexibility + Connection = Wellbeing 

What people want more than anything is holistic well-being. It’s fast becoming the foundational tenant, with a recent survey finding that 80% of employers believe helping workers achieve this well-being is an important objective. Prophet’s research also finds that flexibility and connection are the main levers for getting there.  

Flexibility means accounting for individual and team preferences, circumstances and strengths. 

Connection, and how people experience it, is complex. It encompasses interpersonal dynamics, relationships and interactions among peers. And it also aligns individuals with the company’s purpose and mission, tapping into their own values. Connection flourishes in inclusive environments when people are psychologically safe and comfortable being themselves at work.  

Companies must constantly balance this equation. Any policy that impacts flexibility or connection must be considered.  

Designing employee experiences around flexibility and connection creates an environment of:

Wellbeing: The New End Goal 

Health is now the ultimate headline. People have had the chance to re-evaluate what’s important and possible in their lives. Fed up with outdated norms like the 9-5 schedule and chronic stress and fatigue, employees are less willing to sacrifice their physical, mental and social health for their job. 

As a result, employers are now in the hot seat, charged with prioritizing and more actively supporting these health goals. While previously, employers’ duty of care lay solely in the realm of physical health and safety, the pandemic elevated emotional and mental well-being to the same level of priority.  

More traditional leaders may raise their eyebrows at the expansive responsibility of providing for employee wellbeing. And some long-tenured executives want to resist this change. But it’s too late. The paradigm has already evolved, and the trends are clear: Employees today have a record level of bargaining power. And even if a slow economy causes a blip, this trend will only get more prevalent, as we enter the era of “employment as a service”. It’s incumbent on employers to develop an experience that is desirable, viable and feasible. 

This power shift has been especially acute in retail and food service. When a leading QSR brand engaged Prophet to understand the evolving restaurant workforce, well-being emerged as the central concern. We learned that employees want more than financial gains and physical safety. To them, well-being also meant personal development, solid communities and psychological safety. They wanted a sense that the company cared about them, of course. But they also wanted ways they could demonstrate their care for co-workers. 

Those insights helped us to reinvigorate the employee value proposition and identify the moments that matter, along the entire employee journey, developing initiatives and experiences that would allow it to retain current workers and attract top talent. Prophet developed “100 Ways to Care,” an expanded set of team support systems. The customizable and flexible collection of benefits includes instant pay, automated shift scheduling, and holistic wellness options, focusing on company-led and funded mental health and employee assistance. By first establishing essential truths about team members of the next five to 10 years and envisioning what their journey will look like, signature experiences can address needs and opportunities with new capabilities.  

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We also developed quantifiable metrics beyond the usual engagement scores to measure the impact of these efforts on the experience. Capturing metrics on a wider range of factors including tenure, attendance, complexity of the role, overall job satisfaction and attention to/interaction with solutions, as well as engagement, enables an ongoing view of “experience” and supports agile refinement and improvement over time. 

Other companies are using this holistic approach to make key decisions and reap returns. BP and Bank of America have built mental well-being support and accountability into their leadership cultures. BP gets real-time mental well-being feedback from regular employee engagement surveys to understand how teams feel and how to support them. Bank of America is creating opportunities for colleagues to talk about their mental well-being, breaking down attached stigmas. 

Other organizations are taking corrective action with core business activities, demonstrating the power of employee experience (EX) to create significant benefits to customer experience (CX). Mojang Studios of Minecraft fame, for example, recognized the toll that the pandemic and related stress was taking on the well-being of its employees, even as it faced an urgent deadline on the Caves & Cliff Update at Minecraft Live. It decided to delay the update to ease the burden on employees, sharing the news via a blog post. Users of the world’s most popular game, although disappointed, respected that decision. And they responded by pushing Minecraft’s monthly active users to record levels. 

That’s not an isolated incident of business benefit, either. One recent study ranked companies by measures of workforce well-being. Those in the highest 10% reported a 27.2% increase in return on equity and a 24.8% gain in profits, substantially higher than their Fortune 500 peers. 

The ante is rising. As businesses adapt to growing demands, a holistic well-being strategy will be even more vital to the employee experience. Caring for the entire person–not just who they are at work–is now a table stake when it comes to talent attraction, recruitment and retention. When businesses take care of their people, those people take care of the business. 

Flexibility: Developing a Targeted, Flexible Workplace Strategy 

Much to the delight of many, hybrid working is here to stay. Even the U.K’s minister for Brexit opportunities and government efficiency has revealed plans to offload £1.5 billion worth of London office space because of the number of civil servants who continue to work from home. More broadly, just over half– 53%– expect a hybrid model going forward, with 24% expecting the option to work remotely all the time.  

But for the most part, the policies that initially governed remote work came together in a period of intense panic, implemented in an environment of desperation and uncertainty. 

As firms work to create their long-term policies, they have an opportunity to learn from COVID-era flexible working experiments and formalize what started as ad-hoc solutions. As hybrid working becomes the new middle ground, flexibility must become inherent to employee experience. People want to make decisions based on what’s best for them, considering their families, commutes and work-life balance.  

Dropbox’s 3,000 employees now work remotely most of the time and go to the office for more collaborative and team-building work. The company redesigned its facilities to make this shift, removing individual desks.  

Many financial services companies like Goldman Sachs and Morgan Stanley have drawn a line in the sand for return to the office, wanting employees back five days a week. But fueled by a robust job market, their employees are reluctant to give up flexible working conditions. How can institutions that want employees back full-time compete with others who allow hybrid work? 

Prophet worked with one of the U.K.’s leading financial companies to develop a long-term workplace strategy. Early on, it had won rave reviews for its rapid pivot to a work-from-anywhere policy. But as the months ticked by, it realized that culture, morale and engagement began to erode. It needed something beyond a monolithic approach to flexibility. One size, it acknowledged, definitely did not fit all.  

And this approach had unintended consequences, including increased pressure on leaders to navigate managing fully remote teams. It also raises the question: How can companies retain the benefits of in-person collaboration, which are proven and time-honored ways to keep people motivated, while preserving the option to be remote?  

Our work started – as it always does – by looking through the lens of Prophet’s Human-Centered Transformation Model™.  

This model looks at organizations as a macrocosm of an individual– with DNA, Mind, Body and Soul– and provides a framework to map the employee journey and address all of the organizational factors that touch on the experience people enjoy day-to-day. In this instance, we took a closer look at the core employee personas and archetypes. While many people reported improved morale and engagement, there was an increased risk of losing a sense of belonging and investment in the company’s culture.  

We helped our financial services client create an employee experience strategy that balances the needs of all stakeholders. That meant a shift from flexibility based on individual needs to flexibility that works for all. Instead of asking employees to work from anywhere, they’re now being asked to work from where makes sense for them and their teams – encouraging them to make decisions that balance their individual needs with the needs of the team and the needs of the business. They are also encouraged to make decisions “led by the work.” That encompasses more than just the tasks on their to-do list. It includes learning and development, team building, career conversations and leadership, which all make them feel more connected to the company’s broader mission. 

We’ve worked closely with this client to ensure transparent communication around these changes. Employees must understand that this isn’t about the company going backward on its commitment to flexibility. That would damage the employer-employee trust it has nurtured so carefully since the pandemic began. 

Instead, it’s working to ensure hybrid work options that provide “freedom within a frame.” 

Importantly, much of the focus has been on leadership, ensuring they can be effective in hybrid and remote scenarios, including performance conversations, spotting well-being needs and empowering decision-making. It is also paying more attention to the importance of role modeling. Leadership is both the most significant risk to employee experience policies and also the best amplifier. 

We also helped the company expand the different tools and technology used to maintain performance levels and initiate conversations throughout the organization about what good looks like. Today, they can much more easily encourage inclusive practices to ensure equal opportunity for growth across all talent. 

An essential outcome of this type of work is that leaders throughout the organization better understand why this all matters and just how valuable a flexible employee experience strategy is. Being more intentional about how an organization defines “flexibility” goes beyond a happier workforce. It strengthens the organization, expanding the talent pool for employers. That includes geographical range, of course, but potential employees who must work from home, such as caregivers, and those who simply prefer remote work. 

However, this recruiting advantage will continue to wane as more companies clarify their version of flexibility. That means it’s essential that each organization defines flexibility in a way that meshes with its operations, culture, technology and purpose. Done right, it makes a company’s employee value proposition distinctive and relevant. It becomes a competitive talent advantage. 

Representation and Diversity Matter  

Employees increasingly want to (re)build a sense of connection to their co-workers, communities and the broader mission of the employer. We used to have the proverbial watercooler to engage in small talk and get up to date on the latest developments. Often, it’s where we built trust, camaraderie and relationships. But in increasingly hybrid and digital environments, companies are still finding it hard to recreate the spontaneity and organic moments to build those connections.  

Representation, too, factors deeply into the connection. Employers need to be clear about what diversity, equity and inclusion mean to them and how it aligns with the organization’s values. It needs to be active in the cultural norms and hard-wired into processes, developing metrics to track impact. Research suggests that diverse teams outperform individual decision-makers up to 87% of the time. And DEI initiatives matter to job seekers too, with 64% of candidates saying diversity and inclusion are key factors when evaluating a job offer. 

The presence of women in senior management has long been understood to improve financial performance, and new research finds that as firms add more women, they become more open to change and less afraid of risks, increasing psychological safety in the workplace. Specifically, the firms studied shifted towards innovation, investing more in research and development and less in acquisitions.  

As companies scramble to make sure their efforts show tangible results, attracting, retaining and motivating key talent through turbulent times, we’re finding that small acts of inclusion have the most impact. Robust employee resource groups for workers of color and LGBTQ+ are a must. So are networks that encourage women, who continue to leave their jobs at higher rates than men.  

Prophet’s global research, “The Collaborative Advantage”, finds that one of the biggest barriers to effective organizational collaboration is a lack of clarity on the connection of work to the broader business strategy. Organizations often fail to show employees how working together more closely helps achieve personal and corporate goals. Despite 80% of leaders believing that collaboration produces better outcomes, many are still struggling to meet the collaboration challenge and break down siloed work. 

Humans are fundamentally a social species and people want to belong, to be part of a team. And they want those teams to function well, to collaborate in ways that are rewarding to all involved. Our research shows that individuals who work at more collaborative organizations aren’t just more productive and satisfied. They’re keenly aware that it teaches them valuable new skills and expands their networks. 

Connection Starts with Employee Onboarding 

Organizations realize that they must be more intentional at creating connections at work, finding new ways to put all kinds of relationships back into play, from formal work roles and team responsibilities to friendships and side conversations. 

It’s especially critical to get this right and set the tone for the new joiners’ tenure. Within an employee’s journey, the onboarding experience can define how engaged employees are within their roles and for how long. We worked with Reltio, a high-growth data management unicorn, to improve, standardize and scale the onboarding experience.  

As we spoke to employees across functions and levels, we discovered that new hires depended on the relationships formed in that critical period. In its remote-first environment, Reltio already had a culture of virtual connection and helpfulness, which had become crucial in an employee’s ability to connect and learn important information about the organization.  

To better support this informal approach, we articulated “foster relationships”.  This became one of five experience principles that now inform how Reltio supports new hires. Designed to recognize relationships as a fundamental need, this ensures that employees can continue to stay in touch and support each other as they find their way within the company. This principle came to life across experience concepts, including buddy systems, pre-scheduled meetings, access to organizational charts that outline roles and teams and one-to-one coffee chats.  

The Steep Cost of Standing Still 

All this creates an urgent need for companies to sharpen and expand their employee experience. Businesses, even those that were considered highly progressive employers, are losing talent every day. And it doesn’t look like this recent phenomenon is slowing down with a near record-high number of Americans still quitting each month.   

Employees, from the most highly sought-after tech executives to fast-food workers, know they have the upper hand. They know they can–and will–find an employer more willing to support their total well-being and in some cases offer a pay rise as well (with a median raise of 16.1% in the US). Recession or not, employee expectations have changed forever. 

Twenty years ago, marketers had to accept that the age of customer experience had arrived quickly. Now it’s the employee experience’s turn. Organizations don’t have the luxury of treating the employee experience as an afterthought. They need to be more intentional about every interaction–how they recruit and hire and how they encourage connection. They must acknowledge that individual needs don’t always align with a team or organizational goals. 

They can’t–and shouldn’t–revamp their employer brand overnight. But by focusing on the simple equation–Flexibility+ Connection = Wellbeing–they can shape their vision, building a roadmap to working towards over time.  

By taking advantage of these turbulent times to reimagine the experience employees enjoy, companies can prepare for the growth journey ahead. 

Start with these four general guidelines: 

  1. Of every new experience shift, ask: Is this desirable? Viable? Feasible?  
  1. Tailor the experience strategy and design to clearly symbolize company values and elements of the employee value proposition, aligning them with the corporate purpose and strategy. 
  1. Focus on moments that matter. Employees travel many journeys, and the thing that makes a company great for an entry-level employee may be very different than what matters to a seasoned leader. Understand different employee personas and archetypes.  
  1. Make a balanced, healthy and diverse workforce the new end goal, using flexibility and connection to drive well-being and grow stronger every day. 

FINAL THOUGHTS

Employee experience design is a rapidly growing discipline. It’s how organizations can maximize their advantage in the war for talent and take advantage of seismic shifts in working patterns. When employee experience becomes a central pillar in a company’s people strategy, it makes it easier to align with brands, business strategy and customer experience. 

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