Friday, 20 July 2007

Do you get it?

by Eric Goodstadt 
CEO - Brand Guardians USA 

The separation between those who get it and those who don’t continues to grow... 

Putting the brand first is the difference between growth and stagnation. 

Recently, Fortune Magazine published their annual edition of America’s Most Admired Companies; if you study these annual lists like I do, you would see something very distinct and telling about today’s business environment. All top 10 companies are known for focusing on a higher purpose beyond financial performance. Ironically however, they all are also among the top financial performing companies in the world. 

What is this correlation between a higher purpose and significant financial performance? 

As a former executive member of a few public companies, I saw first hand the pressures to meet the streets expectations. These pressures could, and often would, force executive teams into decision-making purely based on financial results, rather than what was in the best interest of the company, the clients and employees. For me, one of the final straws during my career was listening to a CFO’s plan to add a million dollars to the bottom line profits. His route to do so was by deferring a larger portion of the healthcare cost to the employees, whom at this point were already carrying more than 60% of those expenses. 

When you look at the top 10 admired companies, you see an impressive group of organizations that act purely on their beliefs and have amazed the street by consistently performing financially. Whether it is GE’s Immelt bucking the cut throat tactics of Jack Welch for a more nurturing culture with an emphasis on becoming an environmental responsible organization, or Howard Schultz of Starbucks offering part-time employees a comprehensive healthcare program. Each of these companies and their leaders ignored the street and followed a higher purpose to drive their actions. Although this idea of a higher purpose may sound spiritual, it is actually a sound business strategy grounded very effectively in their respective brands. 

For Howard Schultz it was has been written many times over that he never created Starbucks to be the best coffee maker in the world. Instead, he wanted to create a special respite, or 3rd place for humanity, in our hectic over anxious society. With this brand essence, Starbucks does a lot more then just make innovative and delicious drinks. They are among the most charitable organizations in the world, they offer comprehensive healthcare to all employees who work as little as 20 hours a week, and they consistently create environments that reward their customers with the respite the brand promises. 

Conventional wisdom would say to cut back on the funding to third world farmers for education and clean water, as the charity is too far removed for the average consumer to care. Conventional wisdom would also say to eliminate expensive healthcare costs for part-time employees (just ask Walmart, which is no where to be seen in the most admired list) and to replace those expensive, soft, and cushiony lounge chairs with cheap durable plastic ones. In the end, while conventional wisdom may provide short-term financial benefits, it has always been the long-term consequences that Howard Shultz has been concerned with. His vision for Starbucks has helped countless people in third world countries have a better life and has also provided over 145,000 employees and their families with quality healthcare coverage. In addition, if you judge success by the consistent throngs of loyal people jamming their tranquil store locations, Starbucks has succeed in achieving not just third place status but quite possibly a 2nd place stature among its customers. 

Some will argue that Starbucks, while admirable, is quite unique and shouldn’t be an example for all to follow. To counter that argument, let’s take a look at a company that once was the darling of the street, until the star lost its shine in the 1990’s only to be resurrected by an unconventional choice for CEO. 

AG Lafley was universally agreed to be a shocking selection to take over the CEO position of the ultraconservative Proctor and Gamble. The spiky gray haired CEO looked more like an advertising executive then a groomed successor to the CEO position, but he has proven to be the wisest choice the company could have ever made. P&G has become one of the biggest companies in the world on the basis of maximizing productivity and efficiency of its value chain. 

In its long storied past, the company would have never be confused with a leading design company, as it traditionally chose to sacrifice style and design for low cost production. However, as the technology age has exploded and the consumer has migrated to experiential buying preferences, AG Lafley saw that P&G’s tried and true operational behaviors were no longer valid in this new world. Ignoring his critics and some long time P&G traditions he sunk millions into redesigning packaging of the companies most popular products. In addition, Lafley consolidated brands counter to P&G tradition, creating flagships like Mr. Clean, as well as forced his management to look outside the P&G walls to find new innovative ideas. 

So while the street criticized Mr. Lafley for sinking millions into the redesigning of a $4 shampoo bottle, it was Mr. Lafley who realized that for today’s consumer the design of the shampoo bottle and how it looks in the shower is just as important as the product itself. 

In the end, both of these companies, and the other 8 organizations that appear on Fortune’s list of Americas Most Admired Companies, know something that unfortunately most companies refuse to accept. They know that if you put the brand first and execute the brand promise for the benefit of the company, customers and employees, the financial rewards will come. 

So whether or not you are number 1 GE, embracing its brand of innovation to create environmental friendly solutions, or number 7 Apple destined to be the enablers of melding life and technology, or number 8 Google who is determined to create unique user experiences (for both consumers and employees), it is finding your central purpose that will lead your company to its greatest success. No one can argue with the financial performance of these top 10 companies, and if each one of them achieved this success by honoring the brand holistically, wouldn’t it make sense that your company could benefit form doing the same?