Three Building Blocks of Outperforming Brands
Right now, there’s a massive but subtle shift taking place in the world of business. Companies that are aware of it and know how to capitalise are in a huge minority, yet they’re growing faster than the competition while creating some of the best places to work. They’re also helping to shape a better world for future generations.
The shift I’m talking about is the rise of purpose-driven organisations. By “purpose-driven” I’m talking about companies who fundamentally understand the reason for their existence beyond the simple imperative of making a profit. I’m talking about companies who were either founded on the principle of providing societal value, or who have evolved their business model to advancing a cause that notably improves people’s lives.
According to research by Jim Stengel, “the world’s 50 fastest growing brands found a cause-and-effect relationship between a brand’s ability to serve a higher purpose and its financial performance”
Jim Stengel’s research considered 50,000 brands over a ten-year period and showed conclusively that brands that centre their business on improving people’s lives outperform the competition. So much so that an investment in the “Stengel 50” would have been 400 percent more profitable than an investment in the S&P 500 over that same 10 years.
However, before an organisation can embark on a journey to become purpose driven, there are three fundamentals that leaders need to make sure are in place:
Once these three critical elements are in place, a company can start to evolve their business and grow and thrive as a result.
Understanding the Opportunity
In order to better understand the paradigm change, first consider the two underlying forces that are driving it.
When thinking about the forces that are driving the change, the analogy that comes to mind are the tectonic movements that happen under the surface of the earth’s crust that eventually cause an earthquake. Similarly, the forces that are at play will give rise to a complete change in the way we do business. In the future, the expectation will be that a brand should deliver value to a wide range of stakeholders which includes broader society and the environment.
According to the PR company Edelman, in their 15th Annual Trust Barometer: “Trust in business has declined in two thirds of the 27 markets surveyed and is now below 50% in 14 markets, the worst showing since 2008”.
The decline of trust is really about the disillusionment that consumers have with companies who are creating wealth for a few at the expense of many and the fact that companies are not always authentic in their social statements.
While trust in business is declining, meaningful brands are on the rise, both in terms of their quantity and their performance.
There are now many emerging movements of businesses who are acting for good. To name just a few: Gamechangers 500, BCorporation, Conscious Capitalism, Fortune Magasine’s Change the World List and so on. Many of the companies within these groups have realised, and are capitalising on the opportunity to lead with purpose.
A study by Havas Media showed that meaningful brands, on average outperform the average stock market price by 133%, have 46% more share of the customer’s wallet and perform 100% better on 5 key marketing KPI’s.
(Havas Media, Meaningful Brands Index, 2015).
Thus, the market is crying out for a different type of company, one that is driven by a higher purpose.
Where are we in the shift?
If you’ve ever heard of the Law of the Diffusion of Innovations, you’ll be familiar with the concept that the adoption of new ideas tends to follow a predictable pattern, the one described in the graph below.
While it’s hard to gauge precisely where we are along the journey, it’s likely we’re in the “Early Adopters” phase, gradually transitioning towards the “Early Majority”. The reason this is important is because it means:
The Business Case
Building a business case for becoming a purpose driven brand is made easier by a mountain of research, data and anecdotal evidence that exists.
According to the Edelman’s GoodPurpose study which was conducted in 2012: “When quality and price are equal, social purpose ranks as the most important factor in brand selection”.
Understanding this leads to the inevitable conclusion that re-orienting your business model towards social purpose provides a key opportunity for differentiation and growth. The same study also revealed that increasingly, consumers are recommending, promoting and switching brands based on their affiliation with a cause.
A real-life example of this is the apparel company TOMS. You may know them as a shoe company but they’ve diversified their products to include eye-wear, bags and coffee. What’s unique about them and what’s common to all the products they sell is the “One for One” concept. In fact, more than a shoe company, the founder Blake Mycoskie describes TOMS as a “One for One” company, meaning they embed giving at the heart of whatever they do. Their concept is simple and compelling. For every single product sold, one is donated to a person in need.
By the year 2014, TOMS had given away 15 million pairs of shoes primarily to children were who otherwise at risk of infection or unable to attend school because shoes are compulsory for attendance.
What’s important is that they offer a product of similar or superior quality at a price that is equal or better than the competition, but for every product sold, one is given.
What’s most interesting is their rate of growth. They’ve outpaced other companies in the apparel sector and were recently valued by Bain and Co at $625m. Their growth happened without any money being spent on marketing or advertising, instead relying on the goodwill they created in the market. In addition to the shoes, they’ve also given the gift of sight to thousands through their eye-wear business, the gift of safe birth through their bags business and the gift of clean water through their coffee business.
There are countless examples of other companies who are operating in a purpose driven way and who are prospering and thriving as a result. Below, I’ve included a list of just a few of those companies as well as other resources which support the business case for becoming a purpose driven business.
Examples of purpose driven companies leading their markets:
Powerful resources for building the business case for purpose:
Engaging Your Executives
Typically, leaders when presented with the facts will see benefit and be attracted to becoming a purpose driven company. However, some may also be sceptical and resist the idea of fully committing.
If that’s not overcome, it’s likely to undermine the entire process. It’s a natural tendency to want to avoid change, especially changes of this nature and significance – because it may seem like a distraction from core business priorities.
Objectors may cite the “financial imperative”. They will say that if the company is to grow fast, “everyone needs to stay focused on the numbers, on new customer acquisitions, market share, cost containment” etc.
While there is merit and truth in that, what’s also important to recognise and reinforce is that if a business wants a different outcome, a different path needs to be followed – one that is grounded in business logic and is proven to be effective – hence the need for a sound business case. If a value proposition does not create a clear advantage vis a vis the market, no amount of effort is likely to deliver a transformational result.
Keep in mind, that despite presenting the most compelling and irrefutable business case, you’re still likely to have objectors – the important thing is that objectors remain open-minded enough to carry on and commit to the process. It’s only with time, skill, persistence and the benefit of hindsight that people who resist the ideas are likely come around to seeing the direct and quantifiable benefits of centering business on purpose.
This has been the case every time I’ve facilitated the process. Importantly, if you find you can’t achieve buy in from your leadership team, it’s best to pause and work on overcoming the objections. Either relying on a third party to help or, by force of repetition, proving that the current strategy is ineffective.
The danger with taking too long is that the market catches up with the opportunity and you lose your early mover advantage. By pre-empting this and building a solid business case, you will maximise your chances of success.
Once these three building blocks are in place you will be ready as a company to uncover your organisations reason for existence as the starting point of your purpose journey. I’ll cover everything you need to know on how to do this in an engaging way in my next article.
If you found this article helpful, then you’re going to love the free guide I’ve created for you:
“Turn Purpose into Profit: Three Moves to Attract and Convert Your Ideal Clients”
Just head over to www.nashbillimoria.com/turn-purpose-into-profit and download your free copy now.
I really look forward to adding more value to your lives and businesses.