The Battle for Hearts and Minds
Total Page:16
File Type:pdf, Size:1020Kb
THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY 1 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY IT IS TRUST, MORE THAN MONEY, THAT MAKES THE WORLD GO AROUND. – Joseph Stiglitz 2 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY INTRODUCTION. Economics professor from Columbia University Joseph Stiglitz once said, “It is trust, more than THE YEARS AHEAD money, that makes the world go around.”1 While this has, perhaps, always been true, it is truer today than ever. WILL SEE CONSUMERS Whether in our personal relationships or our VALUE TRUST ABOVE interactions with big brands and institutions, trust is the foundation of loyalty, engagement and PRICE, PROMISE OR affinity - and this foundation has taken a pounding in recent years.2 EXPERIENCE. Consider the litany of ethical missteps and moral failures that have dominated the news cycle in – Mark McCrindle recent years: to the recent Trends in Customer Trust report released • FIFA’s various bribery scandals by Salesforce Research, 95 percent of customers are • Volkswagen’s ‘dieselgate’ debacle more likely to be loyal to a company they trust while • The Cambridge Analytica/Facebook fiasco 92 percent are more likely to purchase additional products and services from trusted businesses.5 • Boeing’s fatally flawed jets • Revelations of widespread abuse and My friend and renowned trend analyst Mark institutional cover-ups by Catholic priests, McCrindle points to similar data and suggests “The bishops and other authority figures in ‘care’ years ahead will see consumers value trust above institutions price, promise or experience.”6 Reflecting on even this limited list of transgressions, This white paper explores the latest research is it any wonder that levels of skepticism are at an examining 12 practical and proven strategies for all-time high by every objective measure? building the trust of consumers in an age of cynicism, skepticism and transparency. For almost two decades the Edelman team have quizzed more than 30,000 people each year across This new operating environment, often dubbed twenty eight countries to assess their levels of trust the Trust Economy, is one that offers enormous in various institutions.3 According to Edelman’s opportunities to those businesses and individuals most recent research, just 42% of the general public who know how to win the battle we must all engage trust the media, 37% trust CEOs and less than a in over the coming years – the battle for hearts third trust the government to do what is right. These and minds. figures represent a drop of up to 14% in the space of just 3 years – a decline that is unprecedented in the absence of a natural or economic catastrophe. 4 In this environment, building trust is more difficult Michael McQueen than ever – but it’s also more important. According 3 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY 01 PICK A SIDE AND OWN A POSITION A compelling article in the Financial Times In a 2018 letter to the heads of the world’s in January 2019 described a modern largest and wealthiest companies, the challenge facing every organization and chief executive of investment behemoth leader: “Whether they like it or not, brands BlackRock, Larry Fink, argued that and those that lead them are already “the time had come for a new model of being dragged into society’s thorniest shareholder engagement.” Fink suggested debates by consumers and employees that “To prosper over time, every company who find it easier to influence brands than must not only deliver financial performance elected officials. Institutional investors but also show how it makes a positive are becoming effective environmental contribution to society. Companies must campaigners and the concept of the benefit all their stakeholders, including activist chief executive no longer sounds shareholders, employees, customers and like an oxymoron. With many governments the communities in which they operate.”8 in disrepute, leaders of finance and He said, “A company’s ability to manage business have — improbably — been environmental, social, and governance handed an opportunity to lead on some matters is essential to sustainable growth, of society’s most pressing issues. Will they which is why we are increasingly integrating take it?”7 these issues into our investment process.” It’s a good question. The market is looking This warning to the world’s business for social, moral and ethical leadership leaders couldn’t have been clearer: rise to from the brands they engage with. They the task or you risk losing the support of aren’t looking for brands and leaders that BlackRock in the years ahead. merely comply with the rules but brands When the head of an asset manager like and leaders that will step up, speak out BlackRock starts speaking in these terms, and stand firm on the issues that count. you know something has changed. Strikingly and significantly, some of the Beyond altruism, business leaders will be most profit-focussed and capitalistic comforted to know that regaining the trust leaders in the world are gradually waking of the market by pursuing purpose above up to this view. …over half of consumers today will investigate a corporation’s behaviour before buying a product or service from them. More significantly, one-third of those reported having decided not to do business with a company because of something they discovered about how the company conducts itself. 4 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY Brands that have a clear sense of meaning and social responsibility have outperformed stock market benchmarks by 120% over the last 15 YEARS. profits actually pays well – and the reverse • According to the Harvard Business is also true. Review, over forty academic studies have found a positive correlation According to research conducted by between operating with strong social Harris Insights and Analytics, over half values and financial performance.11 of consumers today will investigate a corporation’s behaviour before buying • Brands that have a clear sense of a product or service from them. More meaning and social responsibility have significantly, one-third of those reported outperformed stock market benchmarks having decided not to do business with by 120% over the last 15 years.12 a company because of something they • Assets in US funds that aim to discovered about how the company produce social or environmental conducts itself. 9 In this age of transparency, benefits alongside financial returns customers are making increasingly grew fourfold to $12T over the past informed decisions and failing to adjust to decade.13 this reality could cost companies big time in the years ahead. Clearly there’s work to be done in winning back the trust of consumers but the In purely financial terms, the business commercial imperatives for doing so are case for purpose-driven, values-based and hard to ignore. trust-focused practices is hard to ignore. Consider that:10 TO PROSPER OVER TIME, EVERY COMPANY MUST NOT ONLY DELIVER FINANCIAL PERFORMANCE BUT ALSO SHOW HOW IT MAKES A POSITIVE CONTRIBUTION TO SOCIETY. – Larry Fink, BlackRock 5 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY 02 REDEFINE THE YARDSTICKS OF SUCCESS In 1974, Phillips-Van Heusen’s pension fund be “pure and unadulterated socialism.” did something that sparked outrage and The famed Chicago economist Milton scorn in business circles. At a heavy loss Friedman had been the key proponent and against the advice of market analysts, of this argument. According to Friedman the pension fund sold off all its shares in the central purpose of companies was to International Telephone and Telegraph as make profits subject to law and (minimal) a protest of the US conglomerate’s political regulation. Just 4 years before the decision donations. This was the first time the world by Phillips-Van Heusen, Friedman had had seen such a public decision to lose warned in a famous essay that business significant money on a ‘good’ investment leaders who spouted nonsense about in order to make a point. Press coverage at social responsibility were “the unwitting the time was scathing. puppets of those who would undermine a free and capitalist society.” The Financial Times for one slammed the decision as reckless and misguided: “Of So persuasive was his argument that course, the idea of a conscience committee Friedman’s view soon became established playing David to ITT’s Goliath and forcing orthodoxy for business leaders and its will on the mammoth conglomerate is corporate boards. As leading business laughable.” The article’s writer went on journalist Andrew Edgecliffe-Johnson to argue that the job of a money manager reflected in early 2019, this doctrine of was simply “to make money rather than legally maximising shareholder value as subjective personal judgements.” the top priority has “defined Anglo-Saxon capitalism for almost 50 years and shaped This view typified the widely accepted a world that is increasingly driven by assumption that a company’s pursuit of corporations.”14 anything other than (legal) profit would As at January 2019, there were just over 2,600 B CORPORATIONS including brand giants such as Danone, Patagonia, Athleta, Ben & Jerry’s and the Unilever-owned Seventh Generation. 6 / THE BATTLE FOR HEARTS AND MINDS 12 ESSENTIALS FOR WINNING IN THE TRUST ECONOMY This is beginning to change, however, and in a big way. Edgecliffe-Johnson points to the rapid growth of a new type of company: a B Corporation. This new term was coined in 2007 by entrepreneur Jay Coen Gilbert to describe a company that has a stated commitment to benefit all stakeholders and closely monitors its social and environmental impact.