The Purpose Economy, Part 5: Business Transformation

In Part 1 of this series, I discussed The Reciprocity Theory and introduced the need for brands to be purpose-driven. In Part 2, I discussed the foundational human behavior that underlies the purpose economy. In Part 3, I discussed what we can learn from technological revolutions. In Part 4, I discussed the socio-economic evolution that we’re seeing coming from this latest technological revolution. Here, in Part 5, I’ll discuss a framework and roadmap for business leaders to adapt and evolve their firm – particularly their marketing practices.

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.”

Peter Drucker, “the founder of modern management” once said, “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.” Never before, is this statement so true. And, leaders are catching on.

CEOs now realize that the convergence of technology is creating new business models and disrupting their own. They understand that customers wield an inordinate amount of influence on their organizations. As a result the CMO is becoming more influential in the C-Suite. Strong CMOs are leading their teams to deliver exceptional, integrated customer experience and engagement, focusing on data analytics to gain a deeper understanding of their customers and designing rewarding experiences for those customers. And, they’re leveraging new technologies to help them with both.

Meanwhile, CIOs are coming out of the back office into the forefront. The best are putting their egos aside and recognizing that CMOs are driving technology needs and decisions more than ever. And, thus, those CIOs are partnering with their CMOs to enable the transformation to better customer insights and experience. Where there’s a gap between these two functions, the Chief Digital Officer has emerged, to deliver technological solutions and experiences for internal and external stakeholders.

C-Suite Shifting Focus

In this shifting landscape, I offer up a framework for transforming your marketing organization. Since the advent of digital media, the marketing organization has grown larger and more siloed as each new digital channel emerged: .com and e-commerce, e-marketing and CRM, digital ads, blogs and comments, forums and reviews, and social networks. Now, the path forward is to integrate those channels and experiences with critical disciplines in which the modern marketer is fluent: intelligence, storytelling, design and technology. And, these disciplines are directed by the company’s and marketing team’s purpose.

Critical Disciplines for Marketing & Innovation

Let’s start with design.

Design.

Recently, The Design Management Institute and Motiv Strategies released the 2014 Design Value Index where they looked at publicly traded companies that meet their criteria for a ‘design-led’ company. Only 17 companies met the criteria. These include obvious companies, such as Apple and Nike, as well as some companies you may not immediately recognize as being design-led, such as Coca-Cola, Disney and Starbucks. During the 10-year period between 2004 to 2014, these design-led firms grew 219% more than S&P 500 companies – a significant difference.

Design Value Index 2014_2

27 startups that were co-founded by designers have been acquired since 2010 by companies like Google, Facebook, Adobe, LinkedIn, Dropbox and Yahoo

Similarly, in the startup world, design-led firms are being recognized as providing greater value to customers and investors. 27 startups that were co-founded by designers have been acquired since 2010 by companies like Google, Facebook, Adobe, LinkedIn, Dropbox and Yahoo. And, five (20%) of the top cumulative-funded VC-backed ventures that have raised additional capital since 2013 have designer co-founders.*

Design thinking helps these firms elevate the experience with the brand by solving unmet needs for customers, refining the company’s strategy and market focus, integrating a consistent customer experience across every customer touchpoint, and delivering a WOW factor, as Zappos CEO, Tony Hseih would say.

Storytelling

The next discipline that organizations and marketers must become fluent in is storytelling. This is all to often overlooked by companies large and small. Over decades through the advent of radio, TV and digital media brands progressively moved towards one-way push messages through advertising. But, with the rise of social media, customers have regained power over the brands. They expect transparency and exceptional experiences. Advertising and all forms of marketing communications must go back to being more story-driven.

The focus on storytelling is an important distinction. Marketers have been buzzing around hallways and social networks and the speaking circuit touting the importance of content and “brand as publisher”. Yes, content is important. But, there is a lot of shit content out there. The distinction is content that tells great stories. That’s what makes the difference. And, there is actual science to prove that strong storytelling creates a stronger connection with your customers.

Through his research, neuroeconomist, Paul Zak, discovered what he dubs “The Moral Molecule”. Oxytocin is a neurochemical that is key to signaling trust and invoking a sense of empathy. It’s produced when we are trusted or shown a kindness. And, it motivates cooperation with others by enhancing the sense of empathy – our ability to experience others’ emotions. Research found that character-driven stories consistently cause oxytocin synthesis, and the amount of oxytocin released by the brain predicted how much people were willing to help others (e.g. donating money to a charity associated with the narrative). So, is it any wonder why the Ice Bucket Challenge went viral?

Research found that in order to motivate a desire to help others, a story must first sustain attention – an increasingly scarce resource in the brain – by developing tension during the narrative. If that tension resonates strongly enough with the audience, then they will come to share the emotions of the characters in the story, and, after the story ends, the audience is likely to continue mimicking the feelings and behaviors of those characters. This explains your feelings of dominance after you watch an action movie like James Bond or Mission Impossible where the lead character saves the world, or your desire to work out after watching the Spartans fight in the movie 300.

There are business implications to this. Storytelling enables your audience to better recall the key points in a presentation or speech, or in the brand’s content and advertising. “People are substantially more motivated by their organization’s transcendent purpose (how it improves lives) than by its transactional purpose (how it sells goods and services).” The former is effectively communicated through stories.

Zak’s quote below reflects nicely not only the value of storytelling, but also the alignment with the Reciprocity Theory and the movement towards a Purpose Economy.

If business is about service to others, then business itself is a virtue. You’re engaging in a virtuous activity by serving the needs of somebody else. When you do that, you’re serving the needs of your employees, of your customers, you will induce oxytocin release and they will want to reciprocate…In the old model: greed is good, the management technique is lead with fear. In the new model: empower individuals to be the best that they can be in an organization with purpose, you’re going to lead with love.

This value of telling the story of the company’s transcendent purpose is also seen through the research that Simon Sinek produced, illustrated in this TED Talk and in his book, Start with Why. Sinek looked at the language that leaders have used to decipher why some were successful and some weren’t. It came down to what he describes as The Golden Circle.

golden-circle

Most leaders and organizations talk about WHAT they do, and HOW they do it. Rarely do they speak about WHY they do it. The WHY is synonymous with the organization’s PURPOSE. Successful leaders and organizations lead with the WHY. Sinek references the Wright brothers, Apple and Martin Luther King, Jr. as examples of leaders who may have been less known or under-resourced than their competitors or peers, but yet they succeeded above all others in their respective fields. Each of these leaders led with stories about WHY they were doing what they were doing.

In the advertising space, there is also data that indicates the more creative a campaign the more value to the business. In this case creative is defined as award-winning, using data from The Gunn Report. Peter Field and the ThinkBox team ran a statistical analysis of the most creatively-awarded campaigns defined by The Gunn Report and the most effective campaigns, using data from IPA Databank. This analysis found that creatively-awarded campaigns have several key benefits: (1) Creatively awarded campaigns are 12x more efficient, and become more so over time. (2) The greater level of creativity, the greater level of effectiveness. (3) Creative campaigns are more reliable investments. (4) It is in the power of emotional response that brands really make huge progress. (5) Increasing the emotional response to a brand reduces its price sensitivity.

What do these creatively-awarded campaigns have in common? Great storytelling. These stories create an emotional response (produce oxytocin) in audiences that cause an affinity for the storyteller (the brand) and drive them to share the stories with others. More efficient, more effective, more reliable investments that reduce price sensitivity of the brand. Not a bad outcome.

Intelligence

Big data has been all the rage for the last several years. With the democratization of content publishing online (which we discussed in part 3 of this series), we now produce more information (content) every two days than we did from the dawn of civilization up until 2003. Two-thirds of the digital universe is content consumed and created by consumers.**

The advent of social media listening tools thus became an opportunity to gather all types of new insights about customers and other stakeholders. But, most organizations just became overwhelmed by the sea of “big data”. Back in 2008-2012 era, major brands were standing up listening centers and building their own dashboards to try to make sense of the data. I worked on one of these for a Fortune 20 company. They wanted our us to automate insights for marketers and other stakeholders across the organization because their stakeholders didn’t know how to derive insights from the data. I vehemently argued against pursuing this automation because (1) it removes accountability from your workforce and enables them to be dumber, and (2) technology can only do so much. The best case is a partnership between technology and humans: technology finds correlations and trends in the data, and humans intuitively translate those into meaningful insights.

This is an important distinction: a ‘finding’ vs. an ‘insight’. And, they often get confused. I often see analysts present findings as insights, and I believe this is because they do not have the experience or context of how that finding can be applied. A lack of experience executing can hinder the development of context needed to translate a finding into a meaningful insight. There is something else at work here too: a way of thinking that society has taken since Aristotle.

In “The Second Road of Thought”, Tony Golsby-Smith describes two thinking systems that Aristotle defined: (1) analytics, and (2) rhetoric. Analytics is driven by logic and lives in the domain ‘where things cannot be other than they are.’ This is a rigid approach to thinking and how most organizations are managed today. It lacks intuition. It lacks a leap of faith. It is how we diagnose what already exists – what happened in the past. But, rhetoric lives in the domain ‘where things can be other than they are’. This is how humans design alternative futures and invent new things.

In the finance world, this is what sets Warren Buffett and Berkshire Hathaway apart from the rest of the industry. Industry focuses mainly on financial statements and statistics to calculate risk and bet on the future. They measure the past as the leading indicator of how a company will perform in the future. On the other hand, Buffett places more weight on qualitative indicators such as the quality of executive team and that team’s willingness to invest cash bonuses back into the company. There is a level of intuition that goes into his investments.

In the marketing world, this is why the best marketers bridge the gap between science and art. Logic and intuition. Analytics and rhetoric. Big data only tells us so much. It provides findings, which give us logical next steps we can take based on what customers have done in the past. But, intuition tells us what those customers want in the future. Steve Jobs and Apple are the obvious example. Zappos did this in retail by focusing their culture and value proposition on customer service. Free shipping is actually considered a marketing expense at Zappos. Similarly, Rackspace shared this intuition and insight early on in the hosting space. IT professionals needed more support in managing their hosting needs than the industry provided, so Rackspace focused on customer service and created their Fanatical Support offering. And, Rackspace became a premiere hosting company with passionate customers. The best marketing campaigns are those that take a transcendent insight – an intuitive leap of faith about what their customers desire or feel or need – and captures that insight in a well-constructed story (as described above).

And, this is where design-thinking, intelligence, storytelling and technology converge and interact. Design-thinking enables us to derive those intuitive insights from big data. Design-thinking converts big data into intelligence. Storytelling helps us convert that intelligence into a meaningful artifact that induces oxytocin in customers, creating a sense of empathy and a lasting affinity for the brand. And, all of this can be supported (but not driven) by technology.

Technology can accelerate a transformation, but it cannot cause a transformation.

Technology

As we discussed in part 3 of this series, we are at the tail end of a technological revolution. We have seen a convergence of technologies enabling other, new technologies, and empowering entrepreneurs to reshape industries or create wholly new ones. As marketers, we must be diligent in deciding what technologies we need to enable our daily activities: what will automate arriving at findings, so we humans can spend less time crunching data and more time deriving insight? What will enable us to tell better stories? What will help us deliver remarkable experiences? This is priority number one for CMOs. But, is this any different than what the CEO should be thinking about in the context of the broader organization and its business model?

As we move toward the post-capitalist society that we discussed in part 4 of this series, where the key economic resource is knowledge (or intelligence), the best future we can design for humanity is a partnership with technology. Let technology automate as much as possible to eliminate wasteful time and effort from low-value, human activities. Then, we humans can spend our time on high value, transformative activities. As Jim Collins taught us, “Technology can accelerate a transformation, but it cannot cause a transformation.”

Every few hundred years throughout Western history, a sharp transformation has occurred…In a matter of decades, society altogether rearranges itself – its worldview, its basic values, its social and political structures, its arts, its key institutions. Fifty years later a new world exists. And the people born into that world cannot even imagine the world in which their grandparents lived and into which their own parents were born. Our age is such a period of transformation.

Peter Drucker anticipated this transformation to a post-capitalist society, described in the above quote, would be completed by the year 2020. If we believe in the timeline of technological revolutions that Carlotta Perez shared with us (described in part 3 of this series), then the big bang moment for the next technological revolution is just around the corner, scheduled around the year 2021. As much change as we’ve seen over the last fifty years, and particularly over the last decade, it’s hard to believe that change will only speed up. But, it will. We’re on the cusp of yet another transformative inflection point in humanity’s story.

As business leaders, we can learn a lot by studying the cycles of technological revolution to time the market with new products, services and business models. But, it’s equally as important to hone our capability to design the future, the universe that we want to live in, using the disciplines of design-thinking, storytelling, intelligence and technology described above.

I, for one, believe we’re moving towards The Purpose Economy, where technology and recent socio-economic shifts are enabling people to pursue more fulfilled lives – to be economically sustained independently or to work for more purpose-driven organizations with which they share a purpose. To focus on intrinsically valuable (knowledge-based) activities, and leave the grunt work to the machines. To transcend and achieve self-actualization.

This, at least, is the future that I’m designing. It’s the universe that I want to live in.

 

*Design and VC

**Internet Trends 2014

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