Shared Value on INDVSTRVS
Feb 27, 2017
by Rachel Caughey
By Joanne Leila Smith
While price and proximity are still the predominant drivers of consumer choice, the grab your wallet movement, co-founded by Shannon Coutler in the US in October 2016, highlighted a very important shift in the marketplace. Cynics may dub activism as the new sexy for advertisers, but, the desire for strong ROIs by shareholders has been counter levered by an increasingly sophisticated consumer base whom demand more than quality and value from their spend; they demand a pledge – whereby a dollar earnt, is a dollar spent in the cause of a shared value.
The problematics and opportunities this presents for corporates charged with the task of aligning their products with their consumers’ private morality, is complex. Most business school graduates learn that success in corporate life requires dispassionate, fact-driven, clearly identified market segmentation and positioning. To the bane of the executive and marketers, Corporate Affairs welded a sharp axe on any employee who dared wade into the frontline of social or political commentary; it was too risky, too fraught with unpredictability in terms of managing ‘on brand’ messaging, and alienating for potential or existing customers that didn’t align to a company’s public position.
According to CEO of Karrikins Group Jason Hincks, with the immediacy of social media coupled with a very well-informed and demanding generation of millennials, companies that rely on the traditional campaign planning cycle and advertising norms risk becoming outmoded.
“The days of brands being able to go we have a campaign this year and we do a piece of research which says what people think about the brand, and then we go into planning…that just doesn’t exist anymore. I mean those planning cycles absolutely exist around products. But the brands that people really feel an affinity with, are the ones that respond in real time to market sentiment. There’s a few brands that do this well. Just recently, there’s been a bunch of campaigns that have touched on diversity and particularly gender diversity and Nike, responded in real time with a commercial, whose message was ‘if you’re tired of all of this division, know there’s strength in unity’. Yes, it’s a motherhood statement. But Nike just demonstrated that brands can respond to a whole bunch of market sentiment in real time, and, is comfortable in involving itself in conversation and taking a position on social commentary. Ten years ago, the marketing directive was don’t go anywhere near divisive commentary and we are now seeing contemporary brands diving into it, and leveraging it. We are seeing the integration of what people believe in personally, what they’re passionate about, what’s resonating with them in the socio-economic political environment, all becoming part of one narrative,” says Hincks.
What is fascinating is how consumers also leverage brands to add to their own social capital within their peer group by sharing brand commentary as a demonstration of their social or political position. This may be scary as hell for brands, however, the potentially cumulative effect of brands picking up social, celebrity, economic sentiment, whatever it may be, big contemporary brands are no longer afraid to weigh in on a bunch of issues. Historically, it was enough for brands to borrow credibility from celebrity. Now, they borrow from social or political – which is high reward, but high risk.
To help traverse this slippery precipice, Karrikins Group, a cross-industry, growth-oriented consulting firm for big brands, such as Optus, De Beers, Microsoft, Apple, Commonwealth Bank, and Hilton, is one of the few organisations that commands a seat at the strategic table when it comes to all matters relating to corporate social responsibility.
With its Community Investment Solutions arm of the business, spear-headed in North Sydney, Australia, Hincks says that companies are seeing real returns on having an authentic commitment to aligning their community investment strategy with their long-term business objectives. One such initiative KG is well known for is on the community investment strategy side around program design and delivery; KG designs and delivers the world’s largest, face-to-face, start smart school program to 500K students every year for CBA.
As a former Global COO for Movember, and former CEO of Foodbank Australia, Hincks, 46, now CEO at Karrikins since March 2016, is no stranger to the concept of shared value.
During his five-year tenure at Movember, Hincks saw an organisation that grew from raising AUD21M for men’s health initiatives in Australia, to expansion into 22 countries, with a whopping AUD151M raised by the time he left. For Hincks, this was the result of acute business acumen, combined with a genuine commitment to solve a social problem. It is now a formula, indeed a movement, that has now been coined, Shared Value.
Focusing on three key areas, Karrikins Group works with organisations to define and develop their community investment strategy, particularly for organisations that are on a trajectory from an entry point where they currently participate in philanthropy; and guide them towards operating in a shared value environment.
“If an organisation is developing products, programs, undertaking initiatives which not only solve a social problem, but also provides business value, that’s where we are most effective. Our strategy work is often taking organisations on that journey from where they are currently, towards shared value. We start with a valuation of what they are currently doing, where it’s working, if they are getting value for their investment, and, are they able to measure and communicate it to the market in a meaningful way,” says Hincks.
For Hincks, the best outcome for organisations who adopt a shared value approach is the impact on a company’s brand value.
“The obvious outcome is increased brand equity, particularly in an environment where people are using their buying influence to hold organisations they deal with accountable for the way they behave in society. So, brand equity is a big piece, but also, so is achieving real and authentic business value. Shared Value is about delivering true business value as well as solving a social problem. This is where the magic happens,” says Hincks. “When you can authentically demonstrate to your customer base that you are having a social impact – it’s a powerful message. It is becoming more prominent in the brand profiles of organisations who are having real success”.
With consumers increasingly aligning their spend with service providers whose values align with their private morality, there is some data that suggests younger generations are also more inclined to seek employers who give them an opportunity to display their personal values in the workplace. No longer can organisations curate their brand story on product, feature and benefits. The story is about the aspirational collective that a brand creates, or references.
Hincks argues that if a brand makes a customer feel good about their purchase, or an employee feel good about contributing to shareholder return as well as a social cause, two communities of brand advocates come into play – the audience, and your staff. For organisations that have over fifty thousand employees – that’s a big community leverage that needs no cold call. For Hincks, organisations need to be asking themselves, not how do I sell to my customer, but rather, how do I make a meaningful connection with people?
This desire for shared value may be underpinned by public sentiment to have a personal and social relevance to our occupation. According to Hincks, this shift is rooted in both the philosophical, and practical constraints around modern life.
“The fact is we don’t have people sitting in front of linear content for eight hours a day. We need to find ways to integrate with a narrowing sample of content that people are engaging with so that we can carve out an integration or interaction point with a brand; so there’s a big functional driver beyond the philosophical piece. The reality is that people have less time. They’re trying to jam advertisement consumption, product consumption, their sport, into a smaller screen in a disrupted environment. Linear programming is now dead. We are seeing an increasing desire to integrate our social and work life. No longer are companies advocating work/life balance. It’s a migration towards work-life integration. In the past, there was this sense that work was something you did, that stopped, and then there was your personal life. Now, people have much more integrated work-social lives and the way our spaces are designed is a reflection of this. So, it is understandable that it starts to migrate into peoples’ thinking around how they can integrate personal values into their work life, to have a solid alignment between company values and community,” says Hincks.
For Hincks, this shift is not a trend, but a cultural shift. Organisations need to stand for something. Consumers no longer want a transaction, they want a relationship with a brand, and meeting this need, is the definition of being a brand that matters.
“We used to talk about minimising impact on the earth, to a shift to ‘we want to have a net positive impact’ on the communities around us. That’s a big shift. Credible, sustainable sourcing of product has become the base line now. It is expected. Now, it’s about positive net impact,” says Hincks.
With a massive cultural shift from being taught to be dispassionate about our decision making in business, towards passionate connection to purpose, this gives rise to an interesting tension between personal motivation, public responsibility and company profitability. For Hincks, the ultimate business objective is to create efficiencies that increase profitability, and shared value is the mechanism by which the demands of the public and expectation of the board can both be satisfied.
“Shared value is good business. It makes sense to do one thing that achieves two goals if you can. At a base level, if it achieves common good and makes money, it’s a no brainer. Don Thurman, our CCO, has a nice analogy around CSR. He says that CSR today, is what HR was in the 80s and IT was in the 90s. We knew they were important, but they didn’t have a seat at the strategic table, they were seen as cost centres. When you look at tech, and HR, CTOs and Head of People & Culture, they have seats at the strategic table now because we now understand that tools and people are key parts of strategy. We’re not there yet with CSR, but we are close,” says Hincks.
While shared value is still finding its feet in terms of being perceived as best practice, there is encouraging data that suggests a direct causal link between adopting a community investment strategy and increased profitability.
In 2015, a leading reputation-based research and advisory firm, Reputation Institute, ranked the one hundred ‘most reputable’ firms by the public across 15 countries, found a strong link between reputation and share price. Since the GFC in 2008, companies with a strong reputation achieved twice the return than the overall market. It’s study also found higher reputation firms achieved a quicker stock price recovery after a crisis.
McKinsey & Co reported in 2014 that more companies globally are addressing sustainability to align with their business goals; with an increase from 21 percent in 2010, to a 43 percent in 2014.
According to a report by the Committee Encouraging Corporate Philanthropy (CECP) in 2015, companies with the strongest financial growth is coupled with strongest growth in community investments.
Most significantly, research by Professor Bob Eccles and George Serafeim of Harvard Business School in 2014, showed that investments in purpose-driven companies outperformed more traditional investments in the long term. Their analysis revealed that a dollar invested in the value-weighted portfolio of a ‘high-sustainability firm’ in 1993 would have been worth USD22.60 by 2010, versus only USD15.40 for a dollar invested in a more traditional firm.
Strong CSR cultures were also found to increase people performance too. According to a study by the University of Southampton in 2015, it was found that workers who were given a social incentive linked to their job, performance increased by average of 13 percent, rising to 30 percent among those who were initially the least productive.
Considering these findings, we asked Hincks if he was in a position of power to mandate shared value as a best practice for an organisation, whereby, if you have the privilege of incorporating, you have the responsibility to demonstrate tangible community investment. His response was classic.
“There’s a legislative role to apply around ensuring that organisations are operating in the most sustainable way. Would I mandate shared value as a practice? My answer is not yet. I think it would be unfair at this stage of the evolution testing of that philosophy to mandate it. Hopefully you would ask that question in five years’ time, I would have to say yes. Purely from a research methodology, we just don’t have enough data to legislate yet…in the meantime, there is a good article that Malcolm Gladwell wrote, where he argued that organisations should just begin with the premise of ‘Don’t be an asshole’. His provocation was, if every company started with that premise, we wouldn’t see a lot of the activity we see currently. This check yourself mantra, ‘am I being an asshole?’ would definitely present us with a less varied view of morality in the corporate sector,” says Hincks.
Read the original interview here: https://indvstrvs.com/jasonhincks/