Over the past 40 years, two factors—technology and Wall Street—have totally rewritten how brands are built. Both drove us to short-term, transactional marketing.
Technology’s impact is obvious: an upended media landscape, one-to-one customer relationships at scale, a new retail channel capable of delivering almost instantaneous gratification, the constant thrum and beat of social media. Wall Street gets less attention, but recently that has begun to change, with a dramatic shift in the conversation about the purpose of a corporation.
Confidence in our public and private institutions is in long decline. In case you weren’t looking, people don’t expect the government to solve their problems. Even before all that transpired through the recent impeachment process, only 10% of Americans had faith in Congress, down by two-thirds in just two decades.
And people don’t expect big business to pick up the slack. Tone-deaf CEO versus average employee compensation ratios have fueled the debate about income inequality, if not fueling the inequality itself. Tech’s big five are under growing scrutiny for their concentrated power and often opaque motives.
So, it was something of a surprise last year when Business Roundtable, the powerful association of chief executive officers of America’s leading companies led by JPMorgan Chase CEO Jamie Dimon, rejected decades-long adherence to Milton Friedman’s orthodoxy that business exists for a single purpose: to create shareholder wealth.
Business Roundtable now says that business must serve the needs of all stakeholders: customers, employees, suppliers, the community and, last but not least, those pesky shareholders. And when it comes to shareholders, it’s now about long-term over short-term value.
There was plenty of warranted skepticism about the move, particularly during a period of unrivaled economic growth and increasingly frequent stock market record highs. But this was also happening at a time when one sector of the economy is showing unusually high popularity. While Gallup says only 23% of Americans have confidence in big business, down six points over two decades, 68% trust small business—and that trust is growing.
What separates small business from the Fortune 1000? It’s relatable, it’s human, it’s sometimes vulnerable, and it thrives on relationships and community. This is driving the DTC economy—where the growth is—in category after category at the expense of big legacy brands.
But the legacy brands are starting to wake up. Unilever has been ahead of the conversation. Of its 400-plus brands, 28 are what they call Sustainable Living Brands, “those taking action to support positive change for people and the planet,” according to the brands’ mission statement. These brands grew 69% faster than the rest of Unilever’s business in 2018, delivering 75% of the company’s overall growth.
But trumpeting these results put Unilever in the hot seat about its other brands. In November, CEO Alan Jope said that Unilever wants brands to have a purpose. And he’s since gone further, saying that brands that fail to deliver an authentic purpose to society are likely to find themselves ejected from Unilever’s portfolio.
Authenticity is key. It is the only antidote to the skepticism, and so far, Unilever seems to be getting it right. It’s not enough to react in fear of being pilloried by Greta Thunberg; it’s recognizing that the world has, in fact, changed and that the next generation of talent actually cares.
And so now we see other bold moves starting to take shape. Dick’s Sporting Goods’ exit from the assault rifle business, no matter the short-term cost to its bottom line. Larry Fink’s stand to substitute business for the government’s failures to address climate change by redirecting the massive assets of BlackRock. Starbucks’ pledge to reduce waste and water usage. Meat industry scion John R. Tyson’s recently announced sustainability push.
Brands take note: You are where purpose meets people and, increasingly, where purpose means profit. If you are a DTC brand that’s overly focused on the cost of customer acquisition at the expense of empathetic customer engagement, you better look over your shoulder. Because, to take a leaf from Simon Sinek, someone with a real “why” is going to come along and clean your “what” clock. And if you are a big legacy brand built for a shareholder-centric world, it’s time to figure out your purpose to keep the stakeholder-savvy upstarts from stealing your growth.