Why believability is the only competitive advantage

As published in Strategy magazine online.

By Pamela Divinsky and Jon Duschinsky

The days when companies could get away with being disrespectful to customers are fading away. In the age of the conversation, where the voice of one can quickly and effectively magnify into the condemnation of the many, companies feel the heat of being watched and talked about all the time. So brands have become increasingly aggressive about reputation building. Call it cause marketing, corporate social responsibility, sustainability or even brand management – the result is that a contemporary marketing director without a social cause is like a hipster without an independent coffee shop.

Dove champions “Real Beauty,” Starbucks funds scholarships, Becel supports heart health; Honey Nut Cheerios is all about saving the bees (pictured above), Procter & Gamble supports moms, Cirque du Soleil is for water. The brand marketing equation of “brand + social cause” is now standard operating procedure.

The challenge is that we can experience all of this as marketing and, as such, invest no respect in the brand, nor any attentiveness to the cause. Indeed, some companies have actually shone a light on their own duplicity – and been outed for it.

Faced with competing demands and interests, and a world of skeptical watcher-consumers, what are companies to do?  How can they possibly earn our respect, admiration or loyalty?

Companies need believability. It is the only real competitive advantage that matters. When you believe someone, you trust them, and when you trust them you will support them, purchase them, and be more inclined to be loyal whenever there is an inevitable bump in the relationship road. Believability is the key ingredient to building enduring relationships with the people who buy things, and enduring relationships are the key to profitability and success.

But believability cannot be bought. It has to be earned. So how do you do that?

Step away from the marketing

Believability is not a marketing problem, so don’t try to fix it with marketing. No amount of memorable advertising is going to overcome questionable actions, or actions that tell a dramatically different story from your words. Do something substantive that actually makes a genuine difference – then invite people to engage in it with you.

Try a little honesty

Every business is a system, and no system (particularly ones that involve human beings) is flawless. You will mess up. So to gain believability, start by being honest internally to identify and mitigate the risk areas. And then when it does go wrong, get out in front and be honest, no matter how complicated the issue may be. You’ll earn respect by not treating your audience as idiots, and being honest buys you the trust, permission and time to get it right.

Stand for something

Believability is ultimately about coherence and authenticity. And that’s about more than smart marketing and being on message – it’s about defining why what you do in the world actually matters. How does your business actually improve the lives of people rather than just selling things to them?

We call this defining what you stand for and have found it to be the single most powerful tool in helping companies build the competitive advantage that comes from believability. When people know what you stand for, they will stand with you – even when you err.

Your stand becomes the centrepiece of all that you do and say. Knowing and being able to articulate the core truth of your company is the only way to ensure that your whole organization operates and communicates in a way that is coherent and consistent. And that is how you demonstrate credibility and earn believability.

Believability is your competitive advantage. Give people something they can believe in and create conversations of respect and amazingness.


Read more: http://strategyonline.ca/2016/04/05/why-believability-is-the-only-competitive-advantage/#ixzz46El0V4ro


Companies know that their reputation is important for purchase and profitability. While they may have been slower to catch onto this than we would have liked, they do acknowledge the power of social approbation, and are actively trying to acquire it.  The “it” being providing meaningful reasons for people to spend time with, purchase, consume, be loyal to and trust. The question is – do we believe them? 

There are those entities who are clearly in repair mode and support initiatives that present a reshaped, reformed corporate self.  For example:  Exxon Mobil – the company responsible for the world’s largest oil spill - knows it needs a body of skilled employees, so they are investing millions in training teachers in science, technology and engineering.  Or Mark Zuckerberg, the controversial Founder and CEO of Facebook has contributed/invested $100 million to Newark schools, and announced it on the Oprah show, along with then Mayor of Newark, Democrat Cory Booker, and Republican New Jersey Governor Chris Christie.  

There are those entities trying to achieve competitive distinctiveness by presenting as human, humane and honest about the values they believe we want to live by. UBS the Swiss Financial Institution asks us, in a full-page ad in The New York Times, “Can I truly make a difference?  Do I invest in the world I’m in?  Or the one I want?”  The piece ends with copy that reads  -  “We think it’s possible to do good and still do well. For some of life’s questions, you’re not alone.  Together we can find an answer”.  Signed “ubs.com/makeadifference”.  We need to remember that the Swiss National Bank provided UBS with over $50 billion dollars in order to alleviate $60 billion of toxic assets from its balance sheet.  Is it easy for them to now commit to making a difference?  

There are the companies who want to assert that they really are making the world a better place. Oppenheimer Funds tells us to “Invest in a Beautiful World. Invest with active managers who have a long-term view, a global perspective and the courage to go against the herd mentality.  That’s the right way to invest in this big, bold, beautiful world.”  Signed oppenheimerfunds.com/beautiful.  But please note, Oppenheimer Funds are ranked in the top 10 worse funds.  So whose world is going to be more beautiful? 

And then there are the companies that are duplicitous, deceitful (often but not always deliberately), that think they can escape our scrutiny and or believe they are immune from our collective disapprobation.  Best recent example - Volkswagen, the original “car of the people” who has been telling us that they are “THE CAR” = “Das Auto”.  What they didn’t tell us was that they were intentionally creating systems that would deceive us about emissions.  

So what, as Marvin Gaye asked many years ago, is going on?  In our uber-observed world, where we are all watchers and watched, corporations are finding it increasingly difficult to hide their insides from view.  Which means that they not only have to improve how they recover from errors, they actually need to be trustworthy.  Pretending, hiding, obfuscating is no longer an option; social good coating is entirely insufficient; and words alone are wholly inadequate.

The challenge of the watched marketplace is that our media-cum-advertising savvy is so well developed that we smell disingenuousness and are extremely reluctant to believe words or actions. Corporations need to figure out how can they speak and act in ways that are going to be believed. 

What earns believability?  There are four essential criteria:
1.    First act as you speak. Some consultants advise “walk the talk”; environmentalists assert “don’t green wash”; and spinmasters say don’t say things you don’t want to be accountable for. The point is to minimize your credibility gap by make sure your actions match your words. 
2.    Second, be honest. While all your legal counsel will advise against it, honesty is the best approach to recovery and protection.  If you are honest internally you will at least know what your real risk areas (and behaviours) are; and this then makes it a whole lot easier to be honest externally.  
3.    Third, be respectful.  The best way to win the commendation and approval of any and all of your audiences is to treat them with the respect advised by the Golden Rule.  This will not only capture the loyalty of your employees, and maybe of your customers, but more importantly it will ensure people forgive you when you err.  
4.    And fourth, know what you stand for. Define why what you do is important to the world. Then make sure this is the centrepoint of all that you do and say. This is how you cultivate coherence and consistency, allegiance and profitability.   

None of this is complicated, but neither is it easy.  Companies span a wide continuum of performance against these Believability criteria.  There are those companies that are Standing Ready: as all companies, they know they need to be responsible for social issues, address poor customer treatment, environmental management and financial management, but they are doing only what they must according to reporting and regulatory requirements. These companies are vulnerable to severe condemnation when they err, and earn only minimal respect and purchase in the best of times.  For example, VW Group, which has a Sustainability Report, complete with a delightfully informative video, tells us that they are taking care of the Economy, People and the Environment with numerous initiatives around the world.  The combined effort however looses almost all believability in the face of the company’s deceit and trickery. 
There are those companies that are Standing Up – defining key social issues that they are going to do something about through a combination of philanthropy and sponsorship support. These companies have the potential to earn respect and commendation, but are at risk in the Believability department. For example, Loblaws - Canada’s largest grocery retailer, is known for food sustainability. This is reflected in their commitment to sustainable fish and their Blue Menu offerings. Yet in the face of the Rana Plaza catastrophe do we believe that caring for labour trumps their interest in profit? 

And then there are the companies that are Standing Out: they understand that when they know what they stand for in the world, and ensure that it informs everything they do, they not only gain confidence, respect and allegiance of people, they improve their function and are more profitable.  Yvonne Chouinard of Patagonia offers a believable stance.  Committed to environmental sustainability, he is also honest that it is challenging to get everything absolutely correct.  Hence the Footprint Chronicles which explain the supply chain story of how any piece of Patagonia clothing got to your body, with a description of what is still requires improvement.  This honesty approach earns believability, which translates into respect, and permission to not have it perfect.  Indeed it may be that the real benefit of believability is forgiveness with a heavy dose of patience that we allow you to improve and get it right. 

For the next few months we are going to provide commentary on the words and actions of companies.  Are they believable?  Are they trustworthy?  Are they standing for something meaningful?  We commit to sharing our investigations and analysis, and rating companies into three categories:
1.    Standing Ready, and need to pay attention. 
2.    Standing Up, but vulnerable.
3.    Standing Out and redefining what it means to be a great company in the 21st century. 

We want to start a conversation about what we believe to be the new and most overlooked driving force of business today: companies need to be clear, consistent and coherent about what they stand for. The only way that C-Suite folks will be convinced to stand for something beyond simple function is when they hear our collective voice . 

Please join the conversation. What companies do you think are:
Standing Ready
Standing Up
Standing Out


Listening is the new engagement

How can companies be so deaf?  Why is it so difficult for them to listen to their customers? Do they not know that our unhappiness is not good for their business?  Do they not get that partial truths and obfuscation are not good for business? 

Reebok, owned by Adidas, is the most recent example of corporate deafness.  The company believes that the “toning shoe”, with its trademarked EasyTone technology, “promises better legs and a better behind”. Reebok claims that feedback from thousands of women support the claim that these shoes strengthen legs 11% better than regular shoes, and shapes bottoms 28% better than regular shoes.   The company asserts that the testing they conducted proves these results.  Designed essentially to make walking more challenging, these shoes require the leg muscles to work harder – hence the alleged better results.

Not surprisingly, there are customers who do not believe these claims. The US Federal Trade Commission (FTC) initiated an investigation, and found the study results insufficient.  In addition, The National Advertising Division of the Council of Better Business Bureaus found that “the results that suggest potential toning are clearly insufficient to support unequivocal claims that you tighten and tone with EasyTone.” The financial result is that Reebok is set to pay $25 million in customer refunds to the unhappy customers.

There could have been other ways of dealing with unsatisfied customers. Reebok could have convened the customers who were not convinced of the efficacy of the toning shoes, listened to their concerns and criticisms, brought in their technology experts and athletic trainers to explore the different experiences and concerns.  Armed with this knowledge, Reebok could have then altered the product, shifted the advertising or at minimum set up a “tell us what you think” chat room.  Something to acknowledge that there was at least debate about the shoes’ efficacy.

How else could this have been dealt with: Reebok might have collaborated with the FTC and disgruntled consumers in structuring research.  Instead of battling competing research findings, Reebok could have worked together with other entities so that they could at least agree on the rigor of the research process.  Or Reebok could have altered the brand positioning away from the “evidence-based claim” of leg toning, to something in the zone of “the shoe that makes it just a little easier to get some exercise”. 

Reebok chose the “we will prove to you we are right” route.  There are certainly good, solid legal reasons for taking this, but from an outsider’s perspective It is difficult to understand how those reasons trumped the dire consequences to reputational equity, credibility and ultimately the company’s financial bottom line.  Now the challenge – and threat – to Reebok is not about the credibility of the claim of what the shoe can or cannot do, it is that Reebok has made it clear it does not listen to, or respect, its consumers.  And that is far more damaging than performance credibility issues. 

Companies have been exhorted for many years to get involved in “stakeholder engagement”.  This is not complicated.  It means talking and listening honestly and openly with people – your employees, customers and partners.  Yes, this requires a hefty degree of honesty and trust, and demands that you genuinely respect the people you are talking with – and not to.  Welcome to any good human relationship; welcome to the world of social networking.  Listening is the new “engagement”. 

Speak to us as if you respect us.  Don’t market questionable falsehoods.  Don’t hide behind legal contortions.  Speak a truth.  That is what will win our respect, loyalty and continued purchase – even when you make mistakes. 

How is this complicated? 

Falling in Love with Companies

Everyone is doing it. Call it corporate social responsibility, cause marketing, corporate philanthropy, environmental stewardship or even community investment, but most forward-looking companies are trying to demonstrate that they are indeed making the world a better place.


The obvious reasons are:

Pride: we know that corporate responsibility commitments cultivate stronger pride – and ambassadorship – amongst employees.
Loyalty: we also know that clear social purpose and action deepens consumer bonding, purchase and loyalty.
Permission: genuinely playing a role in community development and corporate citizenship earns respect and forgiveness – and licence to operate.
Capital: demonstrating trustworthiness is key to building a credible, well-respectable reputation – and the result is solid social capital, and access to financial capital.
Companies that demonstrate clear and enduring values have the power to win our wallets as well as our loyalty. This is because people purchase commodities, but they commit to values. Bringing your values to life through words and actions is good for business.  But what is truly at stake here is that companies want us to fall in love with them. Be you a consumer, employee, commentator, community partner, distributor or a policy maker, companies want you to date them, repeatedly and loyally. If they were human, they would want you to be in a loving, committed relationship with them.

So what are the features that get us to fall in love with companies – or brands?

Function: The price of entry into the romance game is functional excellence. You have to offer something that I want to use, or convince me that I need to use. And you need to provide something that is functionally better than the other guy.
Intrigue: You need to be interesting and alluring. You need to have a compelling story or proposition. You could start with a great “pick-up” line, but that needs to have substance and meaning behind it. You have to make me want to ask for more.
Purpose: You need to have a clear, genuine purpose beyond your functionality. I admire commitment, I aspire to achieve a higher-order purpose. So if you want me to be your companion, you need to let me know that you are genuinely committed to a purpose.
Values: You need to be guided by a clear set of values – and mean them. Successful marriages are based on sharing and agreeing on values – it means we want the same things and agree on how best to live our lives.
Trustworthiness: Charm without substance is dangerous; you need to be trustworthy. I need to trust that you mean what you say so that I know I can rely on you. Successful relationships survive because of trust.
Action: And finally, your purpose, your values, your commitments need to be brought to life through real action. Because remember, actions speak louder than words. And in today’s marketplace, outcomes are the proof of success.
As a client once said to me – “I get it. If I want to fall in love with someone I need to know what they stand for. If you want me to fall in love with your brand or your business, I need to know what you stand for.”

So how are companies doing? How are they doing in terms of transcending function and articulating purpose and values, and driving real action?

That is what the Divinsky Blog is designed to discuss.

We will explore corporate responsibility activities, cause marketing programs, corporate philanthropy contributions, environmental stewardship commitments – and see how well companies, and brands, are doing in the romance department. Are they getting lots of dates, are those dates turning into enduring connections, and are we falling in love with them.

We welcome your input – tell us your stories, your experiences, your assessment of what companies and brands are doing to attract your attention, and your heart.

What Motorcycles can Teach us about Capitalism

I think motorcycle riding is the perfect liberation from capitalism. As surprising as that sounds, I’ll give you three reasons. First because you can only take a small amount of “stuff” with you, even if you are privileged to be on a touring bike with two saddle bags and a top box. Second, because given this first reality, you cannot shop – there is simply no room to put anything. And lastly, being on a bike takes you out of the “I need to shop” mode and puts you in the “I am experiencing, first-hand, the sounds of new cultures, the sights of new cities and smells of new countrysides” mode.

What is perhaps most interesting about being liberated from capitalism is being able to actually observe it. The first stunning thing I observed was how profoundly unhealthy capitalism really is. We travelled through western Britain and central-eastern Wales. The country is for sale. Every other house, flat, office building in every hamlet, town and city has a “for sale”, or “for rent” sign. High streets are half-vacant; Britain is no longer a nation of shop-keepers. Whether the function of bankrupt economies, decline in tourist traffic and/or changing demographics where the youngsters are migrating to larger towns, the shuttering of capitalist enterprise is noteworthy.

The unhealthiness has another aspect – the physical unhealthiness. The grocery stores in Britain are dominated by chocolate, crisps, cookies, cigarettes and (I wish I could complete with another “c”), alcohol. Notwithstanding the outstanding selection of fruits and vegetables in the larger towns, even the large grocery retailers are dominated by the “4 C’s”, and complemented by prepared meals and sandwiches that are rich with butter and mayonnaise. So while Walmart may have announced its commitment to opening stores in “food impoverished” areas in America, there needs to be an equal commitment to providing access to healthier food. Observation one: capitalism is physically and financially unhealthy.

The second observation was how homogeneous the world has become. One benefit of this is that you can get your favourite yoghurt, jeans or ablution products everywhere; you can also get the same books, see the same movies, and get the same TV shows in any city. And there is a mixing up of cultures, reflecting true acceptance. As my travelling companion pointed out, for example, curry is now the official dish of Britain. Observation two: capitalism can be the antidote to prejudice and prejudgement.

The third observation is how friendly people are. Wherever we went, people were individually extremely friendly and helpful. Stopping for gas at a station in between two very small Welsh towns, not clear where we should stop for the evening, we chatted with the man filling up next to us. He suggested that town A was “a bit sketchy”, and town B a much better choice. And in the town of Brecon where we did stop we asked the inn-keeper where a good place for dinner might be – he walked us across the street to the Indian restaurant he recommended. We enjoyed the best Indian meal we have had in years. Observation three: friendliness is the unheralded foundation of capitalism.

To borrow from George Soros’ perspective on capitalism, which he refers to as “reflexivity”, observing capitalism can have a transformative effect on how capitalism can work. And on a small, personal level, this was the case.

At the conclusion of my “liberation from capitalism on a motorcycle trip,” I had one full shopping day in London, England. As I shopped with rigour and determination on Kings Road, leaving no store unexplored, trying on a multitude of shoes in particular, I was easily able to convince myself out of purchasing. Did I really need this? Did I really like it? How often would I wear it? How essential was it to improving my life? These are questions that only vaguely occur to me when fully participating in capitalist consumption, and if they do, I always answer in the affirmative.

This time two things happened. I easily convinced myself not to purchase; there was either insufficient need, or the desire insufficiently compelling. I didn’t purchase anything for myself. What I did purchase were gifts for friends and family. What I most wanted to do was to find the perfect items for people close to me as a small way of saying I was thinking about them, that they are important to me, and here was a way I could share my trip and experiences with them.

So my grand motorcycle tour, in liberating me from capitalist consumption for a brief moment, moved me from the self-interested consuming mindset to what I will characterize as the “I care for others” mindset. And then I thought, perhaps this might be an interesting way to shift the mindset of a capitalism that has created far-reaching, catastrophic and insidious social and financial destruction around the entire world. Take people on a 10-day motorcycle trip. Perhaps this could be the mission of a new organization – Motorcycles for a Better World. BMW, Triumph, Harley-Davidson, Suzuki and Kawasaki could collaborate and create a private sector-NGO entity that would take world leaders, corporate executives and teenagers on bike trips around the world, inspiring them to see and think about capitalism differently.

The Age of Loyalty

We may be witnessing the dawn of The Age of Loyalty.  Howard Schultz, the CEO of Starbucks Coffee Company has written a full-page letter to Americans published in the New York Times.  He calls on Americans to work with him to restore the American dream, to “set in motion an upward spiral of confidence”, and to pledge together to “put citizenship ahead of partisanship”.  While Schultz’ primary objective is to demand that Washington get over its petulant, dysfunctional behavior, the deeper objective is to say to America that we need to be loyal to each other, and to the dream of individual and collective improvement.

Discontent with, and embarrassed by Washington politicians, Schultz hopes his call to action will energize the citizens of the country.  Schultz is exhorting us to get involved, to respect the American motto E Pluribus Unum (out of many, one). This is because only together will we be successful.

While the letter is addressed to Americans, it speaks to larger social trends that threaten the viability of our future. Schultz is, I believe, articulating an important ingredient of social life that we need to pay attention to – loyalty.  With loyalty we are connected, empathetic and supportive.  Without it, individualism trumps compassion, disconnection triumphs over cohesion, and social solutions become impossible.

Schultz is telling us that we need to take responsibility, individually and collectively.  In the face of the decline of individual and corporate responsibility and the growth of litigiousness, Schultz is exhorting us to step up to the plate of responsibility, if we want to improve how we live.  Blame is not the solution; we need to understand that we are all complicit in the problem and makers of the solution.

This is doubly true because the social issues confronting us are too complex and complicated for any one agency, or agent, to drive effective change.  Governments, corporations, communities, individuals really do need to see that successful solutions will be the result of honest debate and collaboration.  

To spur us into action, Schultz calls on the contemporary approach to social change – crowd-sourcing.  He asks people to submit their pledge to upwardspiral2011.org.  Leveraging the tool of social loyalty, Schultz is calling on us to be more loyal to each other.

One could argue that it is precisely intense parochial, or ideologically-based loyalties, that are part of the problem. The intransigence that comes from intense loyalty is the source of the bankruptcy of American politics. 

Loyalty is both the problem and the solution.  And perhaps that is our eternal conundrum.  We are individuals who crave and need to be loyal to others and to purposes greater than our individual selves. 

What is interesting is that a significant corporate leader is standing up and asserting the need to overcome dysfunctional loyalties that are preventing us from living the lives we can.  Corporate leaders recognize the power of loyalty. 

They have learned that loyalty is good for business.  Providing social purposes that employees can get involved in improves the pride and performance of employees, turning them from employees into ambassadors.  Offering customers loyalty programs encourages tighter consumer bonding.  And offering social programs that encourage crowd involvement improves permission to operate, and has the potential to make a positive difference in communities. 

As CEO of Starbucks, the company that turned coffee drinking in a social activity, Schultz understands the power of the marketplace to drive social change, because he understands the power of social loyalty. 

We are living in the Age of Loyalty.  Characterized on one level by loyalty marketing and loyalty networks, and on another level by involvement in purposes that are greater than individual self-serving consumption, loyalty can be the source of business success and social improvement.   

The New Luxury

Luxury is taking up causes. Giorgio Armani has aligned the launch of his new fragrance, Acqua di Gio with his Acqua for Life Challenge, committing to the goal of providing safe drinking water to 900 million people. Yves St. Laurent is selling its limited edition Muse Two Artisanal bag, made from recycled materials from, and made by impoverished women, in Burkina Faso. These are newer additions to earlier social champions such Bono and Ali Hewson who created EDUN with the vision of creating sustainable trade and promote economic development in Africa; and Stella McCartney’s long-standing commitment to using environmentally sustainable fabrics.

Historically, luxury has been defined by four important ingredients. First the item was of high quality. Second, it was exclusive, which always translated to expensive. Third, it provided some measure of pleasure or comfort. And four, its ownership brings the owner some type of esteem or stature.

Luxury brands have qualified as luxury because they have qualified against all four criteria. Be it early eighteenth century Wedgewood china, Cartier jewelry, Loro Piana cashmere, or the Aston Martin V12 Zagato, these items have been marked as luxury because they satisfy the Five Es – expert, exclusive, expensive, esteem, exquisite.

But luxury is perhaps adding a new E to that list – Ethical. Be it Tiffany’s commitment to sustainable gem stones, Gucci’s commitment to film conservation, or Prada’s commitment to young artists, there is an interesting emergence of luxury’s need to, in some fashion, make the world a better place.

We know that luxury has been able to retain its stature because it also went mainstream. Satisfying the esteem quality required that “commoners” recognized the value and aspired to own; and how delightful that this also expanded the consumption opportunities. Luxury needs the mass-market in order to be luxury. And it has done this with great elegance and panache: combining the high-end, haute couture aspirational credibility, while at the same time delivering product through a rich combination of exclusive showcase stores, department stores, and discount stores. The esteem we achieve through ownership trumps the quality of the product we may actually own.

Luxury has been hurt somewhat by the recession. The obvious is that middling ranks have curtailed their purchasing quite dramatically. While improving of late, there is now increasing focus on satisfying need and quality. The wealthy consumers shied away from exposing their extravagance, which curtailed their display. What is most interesting is that the recent resurgence of luxury purchase has been infected with consciousness of the wider world.

In a recent article in The Wall Street Journal (May 12, 2011), Christina Binkley makes the point that while the truly wealthy were not financially affected by the recession, their purchasing behaviours have been. Binkley characterizes it as “broad-based caution” – the truly wealthy do not need a high price to rationalize a purchase, they are less committed to luxury brands, and are distrustful of marketing. Seeing the extent to which luxury retailers severely slashed prices revealed their grotesque margins and impaired the “expensive” qualification. The overblown marketing of luxury brands has perhaps impaired the “exclusive” qualification.

Binkley notes that while luxury consumers were not necessarily financially affected, they were affected by the visibility of the recession. To support her point, Binkley anecdotally quotes Lyndie Benson (wife of Kenny G the music star) commenting on how one just has to be aware of what has happened in the economy – “If you’re conscious at all, it just seeps in”.

If the recession has had an impact on the luxury market it is that it has forced the luxury consumers to see and experience the rest of the world. That sighting has awakened a degree of conscience.

And luxury brands are not stupid. They recognize the lingering effects of the discounting, the ubiquitous marketing, the contradictions of mass and luxury offering. They recognize that the Four E’s are under threat and require reinvention and support.

Hence the intrusion of the Fifth E – ethics or empathy. For luxury to be luxury it how has to demonstrate it is genuinely committed to making the world a little bit better. This fifth E accomplishes a number of things. It provides a way to diminish, or balance the shame or guilt of sybaritic luxury consumption. It provides a way to ensure that there is a sustainable supply of ingredients and supplies. It supports a way to pre-empt potential criticism of insupportable labour practices, or impacts on local communities. And it injects a way to assert distinctiveness and differentiation in a market increasingly competitive and seemingly “the same”. Injecting a cause can accomplish all of this.

But cause redefines luxury. Luxury will always have to be expert quality, exclusive, expensive, and satisfy esteem. These are table stakes. Differentiation amongst the luxury brands now demands reflecting empathic ethics. Luxury brands now need to see the world outside their limited views, visibly take a stand on social and environmental issues, and make it easier for their consumers to do some type of good while consuming. This will most assuredly resonate with the rest of us, reinforcing yet again the power of luxury brands and our desire to possess them.

Purpose is the New Brand

Social purpose is the new brand. Want proof? Of the 18 full-page ads in the September 3-9, 2011 issue of The Economist, 9 are conventional brand adverts showcasing the functional excellence of the company.  The other 9 are adverts showcasing the social purpose idea or commitment of the company.  The companies that advertise in the world’s leading financial cum world politics magazine, designed for the upper echelons of power and influence, understand that it is their social purpose that will make them distinctive and interesting.

It is interesting to examine a few of these ads in detail and how social purpose is becoming the new brand. 

BMW has a double-page spread that showcases the discussion BMW has launched on Innovation and Technology.  Not an ad about the performance qualities of the cars, this is a pronouncement of how BMW is hosting evenings where guests are “asked to explore their worlds and how they saw macro issues impacting technology innovation”.  Moving beyond conventional brand advertising, BMW is presenting itself as a champion and host of encouraging technology and innovation.  Aligned with their business expertise and interests, yes.  Important cultural and social issue, yes.  Point one:  social issues are now business issues and warrant corporate attention.

Shell’s full page ad opens with the header “Let’s clean Feng’s clothes with cleaner energy”, followed by a description of Shell’s commitment to natural gas, cleaner energy and ultimately their aspiration of “trying to build a better energy future”.   Point two:  for the companies that are in the most criticized -- and critical -- industries, being the champion of environmentally sustainable solutions is essential.

Siemens full-page ad about their public transportation systems is framed as providing “answers for mobility” that help create more jobs and make it possible for people to get to those jobs. Why?  Because as the ad states, “mobility is more than just transportation”.  The ad comes complete with a brief description of what has been accomplished in Charlotte, North Carolina:  a 20-year initiative designed to “move people and attract businesses in a way that’s also good for the environment”.  Siemens is making it clear that they are committed to a triple bottom line in the work they do – good for the people, the planet, and the business.  Point three:  building human communities is good for people and for business.

Southern Company’s full-page ad opens with the header “Idea Power.  We’re tapping into the most powerful resource on earth – the human mind”.  Committed to generating a new kind of energy that will be sustainable for generations, Southern Company knows that the business they are really in is human ideas and ingenuity.  Point four:  excellent functionality is built and created by human beings so supporting human thinking and creativity is essential for business.

And then the Qatar Foundation has a full-page ad introducing us to Nadia Merchants, who is a medical student.  The Qatar Foundation is creating the opportunities and proper conditions for women like Nadia to study, discover and excel, making Qatar a “centre of knowledge that is helping the entire world move forward”.  The way to make Qatar the world centre they want it be is to support individuals in their endeavors; or as the tagline tells us – “unlocking human potential”.   Point five:  success and respect is earned when you champion people.

In comparison, there is the full-page ad for Verizon that tells the reader how Verizon offers the “best wireless service in the world”.  Functional excellence is why we are meant to believe in Verizon, with a small note of support by the publication Global Traveler.  Point six:  functionality is necessary but not sufficient to earn our attention, interest or respect.

Somewhat more retrograde is the full-page ad for Koran Air:  a gorgeous, long-legged beauty stands atop a picture of Incheon Airport with the tagline line – “Experience global networking on a whole new scale”.  Asserting their superior service, Korean Air believes that a beautiful woman and a functional description of who they are will entice us.  That may be true, but point seven is that enticement is short-lived, while true purpose is enduring.

And finally there is the full-page ad for Mandarin Oriental; a picture of Christian Louboutin, the shoe designer-maker famous for his red soles, we are told “He’s a fan” followed by the fan icon that is the Mandarin Oriental.  They believe that we will want to stay at their hotels because the famous and well heeled do.  Again, while this might trigger my “be famous by association” aspirations, I know it to be false.  Lesson eight is that delusion may be an effective attention getter, but it will not make me genuinely loyal.

The overarching conclusion of this summary of a few of the 18 ads in The Economist is that social purpose has penetrated at least the marketing approaches of leading global companies.  They recognize that to stand out, be respected, and be distinctive they need to showcase a purpose deeper than their functionality.  Purpose is the source of attraction and bonding.

What we hope is that these companies also understand that they actually need to be committed to issues or approaches that have the potential to make the world a better place.  Because when they make the world more inhabitable for humans, when they support the social livelihoods of people they create healthier conditions for their own success.  

Indeed, social purpose is not just the new brand; it is now the source of enduring business success.  

Private Behaviour - Public Performance

It has long been a tenant of capitalism that one’s private behavior is irrelevant to one’s professional performance. There has been a clear demarcation between private and public behaviours, with extremely limited intrusion of the public into the private.

This was not historically true to the birth of capitalism. And it appears that we are increasingly unwilling to continue living with this divide.

The recent exposures of questionable, private behaviours and the real consequences on their public, professional roles indicates that we are collectively, increasingly intolerant of the public-private divide.

Because of his private behaviours of cavorting with women while married, and acting in ways that made it easy for this information to become public, Tiger Woods has suffered professionally. A number of companies removed their sponsorship agreements, believing that his bad behavior would impair their reputational equity. And I would be remiss not to mention the decline in his golfing performance. While a wise man explained to me that without the multiple balls in the air to manage, he has difficulty in focusing on the ball he needs to pay attention to, it does not take a sophisticated, professional therapist to know that there is some correlation between his private behaviour, public humiliation and professional performance.

Always considered the “bad boy” of fashion, John Galiano’s reputation was part of his charm, allure and success. But his public articulation of racist remarks cost him his professional job, and stature.

The revelation of the existence of his thirteen year old child with a member of his household staff has not only ruptured Arnold Schwarzenegger’s marriage, but has put his renewed Hollywood career on some type of hold.

Predatory sexual behavior has cost Dominique Strauss-Kahn his professional role, and will take him into a courtroom. While his qualities of expert strategist, financial leader, political savvy and leadership effectiveness have earned him professional respect and success, the flip side of these qualities are what have been his downfall. Indeed for all these individuals, their charm and charisma have been the source of success and demise.

There are a few solid reasons why private behaviours are connected to the ability of someone to perform professionally. How they treat people in private is a good indicator of how they will treat people in their organizations. The internal cultures of organizations are the working and living conditions of employees, and the degree to which they are supportive and bring out the very best in people is the degree to which an organization will be successful. Good treatment of people drives successful enterprises.

Second when we are talking about people in positions where their decisions affect the lives of many, then we want leaders who make wise choices. Private behavior is an indicator of the wisdom, sagacity and prescience of an organizational leader; so when they are making ill-advised decisions in their private lives, how good will their professional decisions be?

And third, great leaders are great because they get us to follow them. We trust these leaders to lead us down the right yellow brick roads. They make decisions that have real impact on how the rest of us can live and prosper. Private behaviours, when they are not aligned with their public responsibilities, impair our trust in them. And without trust in our leaders we lose our reason to believe, our connectedness, and can descend into the worse forms of behaviours.

Human treatment, wise decision making and trustworthiness – these are the legitimate reasons why public roles are measured by private behaviours.

There are also a few reasons why private behaviours are precisely that – private. We have individual tastes, quirks and preferences. That is what makes us individually interesting and collectively resourceful, innovative and able to create new futures. The elements that define our individuality need protection.

Not all of us carry the responsibilities and demands of public positions. While we hope that we do behave with decorum, wisdom and civility in our professional roles, if our private decisions are questionable, the power we wield professionally is inconsequential. So yes, our leaders are held to higher standards of performance, demanding closer alignment between private and public behaviours.

But perhaps the larger question, or concern, is the degree to which there is very little private space left. Social networking has begat a world where all private behaviours can now be public – voluntarily, or not. We are spawning a culture where people aggressively want to have their private lives publicly displayed. We also live in a culture where there that nurtures both the demand and the supply for salacious, private information.

The constant watching that now characterizes our culture is one of the ingredients that historical observers of the birth of capitalism argued would be the saviour of capitalism. Being watched, for Rousseau, would ensure we all behaved as Citizens, guaranteeing that the public interest would prevail over private self-interests. For Adam Smith, the famous “observer in your breast” – the “impartial spectator” would ensure that private individuals would be guided by the public good, not their private interests.

The concern that observers of early capitalism had was that a community of self-interested, private individuals would be unable to produce the public good. There needed to be ways to ensure that communities would be guided by public interest, not just the majority of private interests. And so Rousseau recommended an external public observation of all community members; and Adam Smith asserted that as social creatures that need the approbation of others, we are all imbued with our own internal observer that tells us what the publicly right thing to do is.

Today it would appear that we are again worried about the presence of private interests infecting public roles that command authority and demand wisdom while at the same time we live with almost complete publicity of even our minutest behaviours. We need to be worried about the lack of private judgement and trustworthiness. We need to also be worried about the blurring between private and public, because without clear demarcation, the public turns into a tyrannical ruler, not a benevolent force for public good.

Are Watchers essential to capitalism?

My personal trainer has taught me an important truth: Observation drives better behavior.

The more I am observed, he told me, the harder I exercise. I am more focused, consistent and committed. It is harder to cheat, I feel guilty not showing up, and actually feel compelled to exercise more strenuously.

This truth about observation, I believe, is as true for individuals as it is for corporations: Being observed may be the best solution to making corporations behave better.

I recently read an interview with Eliot Spitzer in Sunday New York Times magazine section (Sunday March 20th, 2011). The former New York Attorney CNN was asked if he gets angry when he meets those who exposed him for consorting with prostitutes. The reason, he says, that he does not get angry publicly against his accusers is “because there are too many people watching”. The implication — that he would if he could — is both illuminating as well as revealing of the personality that drove him to his excesses, both good and bad. That the public is watching constrains him; he is therefore forced, he feels, to behave better because he is being observed.

This reminded me of two excellent examples of reformed corporate behavior driven by public watchers. Kimberly-Clark was outed by Greenpeace as complicit in clear-cutting forests. And ForestEthics outed Victoria’s (dirty little) Secret – not using recycled or FSC-certified paper for its millions of catalogues.

Greenpeace orchestrated an agreement with Kimberly-Clark where they committed to no longer purchasing pulp from two forests in Northern Ontario (Kenogami and Ogoki Forests) until certain ecological criteria were met; in addition Kimberly-Clark agreed that 100% of the fibre used in its products will be from environmental responsible sources. These commitments came only after Greenpeace ran a stinging campaign against Kimberly-Clark – the Kleercut campaign – that ran for five years. The campaign involved convincing over 700 companies and 17 universities not to purchase Kimberly-Clark products, moving vans and logging trucks were made to look like Kleenex boxes, and there were several blockages of mills and Kimberly-Clark offices. The question remains – would Kimberly-Clark have shifted their behavior had it not been for the observations and extremely public outing?

ForestEthics, a San-Francisco-based environmental group, waged a provocative campaign against the lingerie company, Victoria’s Secret (parent Company The Limited) which is reported to mail out over 350 million catalogues a year. Victoria’s real secret was that these catalogues were printed on non-recycled, nor FSC-certified paper. ForestEthics’ objective was to get the company to use more recycled paper. Playing off the concept of “secret”, the campaign involved mini-protests in front of stores, and full-page ads in major newspapers, in a style similar to the catalogues.

Two NGOS doing the homework and reconnaissance, creating innovative social action campaigns drove two companies to change their behaviours.

Adam Smith had a watcher in his description of the emerging capitalist economy. He called it the “impartial spectator” – the voice that resides in all of us that tells us if our behaviours are good or bad. The impartial spectator exists because, as much as we love ourselves and are self-interested, we equally want to be loved by others. As Smith put it, we want the approbation of others, and that is the source of this internal spectator, or watcher, who guides us towards better behavior.

Be it out of fear of punishment, or the loss of love or respect, we behave better when others are observing us. Back to my trainer, yes I want him to think I am great; I also want to avoid the punishment, potentially even larger thighs. Which is why the NGO watchers are so vital.  Without them, there would be no public outing, no evidence-based criticism, no exposure of duplicity and disingenuineness. NGOs are our collective impartial spectators, watching the behaviours of corporations and, if not actually exposing corporate malfeasance, the fear of them driving better behaviours.

At the end of the First Book of The Wealth of Nations, Smith discusses the three levels of society: the landed classes, he says, because they do not have to worry about how they make their money (it is secured because of the land they owned; remember this was 1776), knew the public interest, or good. The problem, however, is that they do not understand how the new emerging capitalist economy works. So while they are trustworthy, they no longer have the right knowledge. The monied class absolutely understands how the new market system works, but they cannot be trusted because they are entirely self-interested, and have no vision of the public good. The laboring classes, have, again according to Smith in 1776, neither the knowledge nor time to consider the public good or how the market works; they spend their lives working to survive.

Much of this assessment continues to be true. If the recent financial collapse tells us anything it is that the “monied class” absolutely understands the system, but is not to be trusted to ensure the public good. And those of us who toil in the working class also know that while we may be inclined to strive for the public good, our daily concerns of mortgages, children, parents and community activities preclude us from pursuing the public good in any fulltime way.

In 2011 we no longer have a “landed class” that need not worry about their income, although one could argue that we have a few wealthy philanthropists who have devoted themselves to improving the world. Apart from this extremely select group, the heartbreaking difference between Adam Smith’s day and today is that there is no “class”, or group of people that sees the public good. And we need to be able to see it first in order to act on it.

We need people who watch out for the public interest. Even if they are extremists or fanatics, they provide an essential function to capitalism – they observe with an intensity and rigour that has the power to shine glaring lights on corporate behaviours.

We may object to the earnestness, and often extremism, of NGOs – just as the extreme enthusiasm and drive of my trainer often irritates me. One might also question their motives.

Driven by a combination of wanting to make the world a better place, wanting to expose corporations, and believing in the absolute rightness of their position, NGOs are tenacious zealots in seeking out behaviours they believe damage the public good. NGO watchers may not have a vision of the public good as Smith believed the landed classes did, but their hyper vigilance is essential to the survival of capitalism.

If corporations want to pre-empt the uncomfortable outings that are increasingly common, they might consider a new position – Chief Conscience Officer, a corporation’s impartial spectator.  Being observed may be the best solution to making corporations behave better. And a final thank-you to my trainer (who is far more than an enthusiastic “rep” counter) for suffering through the boredom of watching me sweat. You have made me fitter.

Social Cause and Company Date Gone Wrong?

It would appear that the romance between Cocal Cola and Save the Children has hit some troubled times. The match was a good one. With Coca Cola committed to “Live Positively”, and Save the Children committed to improving the lives of children, there was clearly a solid connection.

But where Save the Children wants to tackle childhood obesity and re-educate people that soda pop is a significant source of unnecessary sugar (and hence part of the complex set of conditions that creates obesity), that runs head on into Coca Cola’s core business. So while they may like each other very much, and, indeed, some of their dinner conversations are supportive and encouraging, it remains a serious rift. One could say, as my father often prounounces, that the “relationship is doomed before they even take the vows”.

Coca Cola has one of the most innovative and leader-like approaches to brining its social dimension to life, Coca Cola Live Positively. An excellent, and refreshing framework, and commitment, Live Positively brings coherence to the many activities Cocal Cola supports. Building bike trails across the USA; supporting academic scholarships; supporting Boys and Girls Clubs of America; supporting a number of environmental initaitives; and adding calorie information to the front of their packages – it is clear that Coca Cola supports making “the world we all live in a little bit better. Indeed, when asked over the past year or so what companies are doing “coroporate resopnsibliity” well, I have cited Coca Cola as one of the few companies that understands how to align their Brand and business with truly standing for something meaningful and relevant.

Their erstwhile dating partner – Save the Children – is equally committed. Operating for over 75 years, its mission in life is to “inspire breakthroughs in the way the world treats children and to achieve immediate and lasting change in their lives.” Save the Children does outstanding work: responding to disaster and emergencies; programs in children protection, education and child development, HIV/AIDS, and health and education. The organization also sponsors global campaigns on serious issues. See Where the Good Goes is a campaign to mobilize people to help health workers around the work save more children. They also sponsor Rewrite the Future, a campaign to galvanize support for providing quality education to millions of children around the world, because, according to Save the Children, more than 75 million children are growing up without an education. And Save the Children has noteworthy partners that support them in their efforts: the Bill and Melinda Gates Foundation; USAID and in Canada, CIDA; and a partnership with the luxury jeweller Bulgari, who has created an iconic co-branded ring with a percetage of proceeds going to the cause. Other corporate supporters are both Coca Cola and Pepsico. (Pepsico bestowed a $5million grant for work in India and Bangladesh.)

Social causes can create strange but effective partnerships. Coca Cola and Save the Children is one example; a global beverage company partnering with an organization devoted to quite literally, saving the children of the world. Together they could accomplish great things because both have a significant commitment to “living positively”.

Sadly, there is a “but”.

As part of their commitment to having a real impact on childhood obesity, Save the Children has been advocating for a tax on soda pop. This would serve obviously to make soda more expensive, and out of the reach of many households, and children. It would also serve to raise awareness of the issue – drinking sweetened drinks can be hazardous to your health. And we know from the long history of social change that high-impact change comes from the imposition of positive or negative incentives. In this case the approach is to install a punishment on consumption. If we are not smart enough to decrease consumption on our own, we will be punished into doing so.

And here is where the relationship has hit trouble. Notwithstanding the wide product portfolio of Coca Cola – which includes Minute Maid, Dasani water, Five Alive and PowerAde to name a few – a tax on soda pop is a threat to the business of Coca Cola.

So what’s a fellow to do? Stop dating the partner that can threaten his livelihood? Or does the potentially threatening partner change her ways?

You guessed correctly. Save the Children has backed down from its support of the soda tax. Paraphrased in a recent article in The New York Times (December 14, 2010) Carolyn Miles (COO of Save the Children) said that after much consideration the organization decided this approach was too controversial and did not fit with the way Save the Children works.

This is undoubtedly a blow to the effort to raise awareness of the dangers of soda consumption, and to try to decrease its consumption. It also highlights the debate on the approach – do “sin taxes” have the right effect? Should legislation move into the realm of individual food consumption? Currently no soda tax legislation has passed. Too controversial an approach; too difficult for us to stomach? Yet as we know, social change is typically driven by early extremist-type positions. (Although one could argue that the Save the Children and Coca Cola relationship reporting is good publicity for “the cause”.)

It is what this reveals about public-private partnerships that we need to address. We know that companies want to make a difference in order to repair, protect, improve their reputational equity and strengthen the emotional bonding people can have with them. They need the partnerships of cause organizations that have integrity and drive real action to achieve this. We know that cause organizations need the monies and band-width of large corporations to achieve their ambitions. Hence the effective dating game.

But successful dating needs an equitable balance of power. When one partner has the power to shut down the actions of the other, or impair the integrity of the other, or damage the business of the other a good match the two do not make.

So what then is the resolution, or solution?

I believe there are three important principles of engagement:
First, if companies truly want to cultivate reputations that we respect, and even adore, they will need to partner with entities who are involved in activities that may threaten their business. This demonstrates their truly genuine commitment to issues. It is also politically wise; keeping your “enemies” close to you is always wise long-term planning. And if indeed the threat to their business is real, then that is an indicator they need to be paying attention to – if they are interested in building an enduring business. In this instance then, if soda pop is potentially the “new tobacco” then Coca Cola might want to be part of the solution. Strong, high-integrity partners can be good sirens of the future.

Second, cause organizations might want to consider developing approaches in conjunction with their corporate partners that make it easier for them to be part of the solution. So rather than feeding the inherent antagonism, as prescient members of the community they could help lead corporations to better behaviour.

Third, if social issues do threaten our ability to “live positively” then we need to really understand that. If we are not a healthy, thriving public, that is perhaps the most serious threat to business. It will only be combinations of forces that can drive genuine social change. The conventional, often antagonistic divide between corporations and cause-defined entities need to be dismantled if we are going to have a real impact. We need, to borrow the language of Adam Smith, have a vision of the public good.