Marketing Myopia in a Climate Changing World
Marketing Myopia in a Climate Changing World
Fifty years ago, Theodore Levitt published a seminal article in the Harvard Business Review. Titled "Marketing Myopia" it challenged the business paradigm of the day by asking readers to think of industry as a customer-satisfying process, not a goods-producing process: "an industry" said Levitt "begins with the customer and his needs, not with a patent, a raw material, or a selling skill".
Those who grasped this concept and made the customer king could create organisations capable of capitalising on growth opportunities while those who focused merely on operational efficiency or the power of a patent, would eventually find their customers would wander off as others tempted them with newer, better alternate ways to have their needs filled. The key was to view the business organisation not as an entity that produced a good or service that needed to be sold to recalcitrant customers but rather to seek to do the things that would make customers want to do business with it. This would make the objective of business not be about mere survival but to "survive gallantly, to feel the surging impulse of commercial mastery; not just to experience the sweet smell of success, but to have the visceral feel of entrepreneurial greatness". No wonder CEOs across the world were soon asking themselves the key question of "what business am I in?"
Today, the world is facing a new challenge to the business paradigm. It is now clear that the way we conduct business throughout the world is having an adverse effect on the natural environment and that the scale of that impact is not only growing but is on course to threaten the basis of industrial civilisation as we know it. Despite the impression you may get from the media, the science on climate change is actually quite straight forward and is long standing. The so-called "greenhouse effect", where it was recognised that the composition of the Earth's atmosphere caused it to retain some of the heat from the sun's energy, goes back to 1824. The role of carbon dioxide in absorbing infra-red radiation (i.e. heat) was identified in 1859 and the first prediction that man's activities could alter the composition of the atmosphere (and hence the climate) was made in 1896, albeit the scientist that did so thought it would a good thing as it would prevent the world going back to an ice age. The first claim that warming was underway and evident was made in the 1930's and the first regular measurements of the level of concentration of carbon dioxide in the atmosphere started in the 1950's; they have steadily risen every year since. The political debate that has surrounded the science has been focused on how big a problem global warming was going to be and the timescale for its effects to be felt. These have been more difficult questions to answer because the product of burning fossil fuels contains "greenhouse gases" that cause warming but it also contains particle pollution that has a cooling effect. Which effect would prevail was controversial among scientists for a while. In an attempt to resolve these and related issues, the world's governments founded the Intergovernmental Panel on Climate Change (IPCC) in 1988 to examines the science and inform the policy debate. The panel has made four reports over the course of its history, the third of which in 2001 stated that global warming, unprecedented since the end of last ice age, is "very likely," with possible severe surprises. This effectively ended the debate among all but a few scientists and the most recent report in 2007 warned that serious effects of warming have become evident and the cost of reducing emissions would be far less than the damage they will cause. Exactly what the damages will be, when they will be felt and by whom is still a topic of active debate but continuation on the current course leads to the impacts of increased storms and droughts being keenly felt by 2020 and by 2050, half of the world's arable land could be lost to rising sea levels.
Despite the strength of the scientific evidence, the political will to act has not yet materialised with international politics getting bogged down on the relative responsibilities of those economies that currently produce a lot of greenhouse gases to cut their output versus those economies that are growing to avoid adding to the global total stock. Politics, however, is not business. There are now a growing number of enlightened businesses that are recognising that customers will be increasingly unwilling to buy from those who treat the environment as a dumping ground and have no concern for tomorrow. Faced with the choice of doing business with a company that myopically focuses only on today versus one that is working to reduce its current impact and helping to create a future world that has a safe and healthy climate, that enjoys clean air, water, soil and power, an increasing number will go for the later. The visionary business leader of today is taking the proactive stance to look at the sustainability of their business model.
Sustainability has a variety of interpretations but within the sphere of economic activity can be thought of as one customer's use of a good or service not adversely impinging on a future customer's ability to enjoy that same good or service.
The way the world currently conducts and accounts for its economic activity is, quite simply, not structured to encourage that way of thinking. The production of "goods" and "services" are costed in the same way regardless of whether the good is a "primary" one (i.e. a product of the Earth) or a "secondary" one (i.e. a product of man) and no distinction is made between the cost of using a primary good that is non-renewable (e.g. a mineral resource) versus a renewable one (e.g. a plant). Economics is supposed to answer the question of how best humans can maximise scarce resource but the way we account for our economic activity makes the ludicrous assumption that the planet's resources and services are not only unlimited but that there is no cost attached to their use. In the words of Henry Ford, "Although may calculate what a cost is, no one knows what a cost should be"
The root of this problem lies partly in how humans have generally viewed their relationship to the rest of the planet (dominion) and partly to history: the basic tenants of accountancy were laid down with the invention of double-entry book keeping in 15th century Italy while the basics of economic theory came from the 18th century Enlightenment thinkers. To both groups the world would have appeared, and indeed was, an enormous and bountiful place. To think of the Earth's resources and services as having a practical limit would have seemed foolish. But as any decent business manager knows, size matters.
The human population has rocketed during the 20th century ending with around 6.6 billion people, a level four times higher than at the start. Although the rate of increase has slowed, the next 20 years are expected to see about half that number again added to total population.
As society is now essentially a global one, there are fundamental questions that need to be addressed about the nature of the framework within which we operate our economies. Business has long been use to the idea that it is necessary to have a depreciation charge to put aside cash so that when a capital item needs replacing there is money to do it. By considering natural resources and services as natural capital, one solution would be for business to pay for the depreciation on that natural capital. If they were obliged to spend that charge on restoration projects of their choice (e.g. restocking oceans, protecting biodiversity, taking carbon out of the atmosphere) it would by-pass government administration (but not verification) and so would, in fact stimulate economic activity by expanding those things that were considered within its bounds. It would also put us onto a rapid course of making things better and encourage the needed creativity that has, so far, ensured our species has thrived.
Although there are several organisations working to reform the basis of accountancy, day to day business has to work with the world as it finds it rather than as it would like it to be: profitability is still the requisite condition for business continuation. With that in mind, there follows an outline framework for how a business can maximise its sustainability and minimise its exposure to the likely impacts of a changing climate over the next few years.
Contingency Planning
On one of the consistent predictions of the effects of global warming and the climatic changes it will provoke, is an increase in the frequency and violence of extreme weather events. The floods experienced in Queensland, Australia in January 20011 had been previously experienced in 1974 and before that in the mid 19th century, despite flood prevention measurements taken during the intervening periods. Mining companies have had to announce that they won't be able to meet contracts for coal, Australia's biggest export, while farmers are counting crop losses that could push up world food prices. The overall cost to Australia's 1.3 trillion A$ economy could amount to as much as A$13 billion, or 1 percent of gross domestic product. Some business will be able to clean up and recover, many will not and the difference will be between those who have effective contingency plans in place and those that do not.
The big management challenge about contingency plans is the human trait that recognises disaster as a possibility but discounts the likelihood that it will strike any particular individual contemplating it. The emergency services get over this by periodically putting their plans into practice and business could learn from that. Amazingly, few businesses manage to hold a successful fire drill far less test out their ability to recoup their computer backups, know where they would find alternative accommodation should their facilities become unworkable or have any idea of the vulnerability of their key suppliers to natural disasters. Contingency planning might seem like a costly and boring use of resource but it could have an enormous impact on your likelihood on surviving catastrophe.
Towards Sustainability
In the same way as Levitt told his readers that "building an effective customer-oriented company involves more than good intentions or promotional tricks; it involves profound matters of human organisation and leadership", a sustainable business model is not creeping incrementalism tweaks here and a spot of product innovation there. Transitioning to a sustainable business model requires wholesale transformation of how a business does business. Sustainable business models can exist in an unsustainable world. It is the model for the business, not the overall economy. However, they are not created overnight. Be prepared for a journey towards sustainability but make sure that you generate a clear road map. The goal is transformational change, not incremental tinkering but your map may need a number of "wedges" where many smaller actions are needed to generate the overall impact.
The "Quick Wins"
Carbon emissions = energy = cost
It has become evident over the past few years that there has already been a paradigm shift in energy prices and that the prospect for the next few years is for energy (and probably all other raw material) costs to continue to rise. Efficiency levels in virtually all businesses are surprisingly low whether it is through careless use of resource, lack of information about where savings could be made or simply because the overall system inefficiency masks the potential for improvement. It may surprise you that even in a transport company, until recently fuel consumption wasn't even on the management radar even though it accounted for 5-7% of costs. Driving styles can impact fuel consumption by as much as 20% so a programme that seeks to get all drivers to coax the same mileage as the best practice could be looking at an amazing 1 to 1.4% percentage point reduction on costs. This money could either go to the bottom line for improved profitability or be reinvested in other energy saving programmes like replacing old boilers, improving building insulation or even on site generation of electricity.
The Long Game
At present, our industrial system operates what is essentially "Take-Make-Waste" economic system. We take resources from the earth, use them to power our economy and convert them to goods and services for our use. Massive amounts of often toxic wasteincluding carbon emissionsare then dumped back into the same resource base we rely on for our sustenance without considering the negative consequences for the overall system. This "Take-Make-Waste" system made sense when it emerged at the dawn of the industrial revolution because resources were plentiful and there were few people but it is increasingly recognised as not being fit for purpose either today and certainly not for tomorrow. Increasingly, there is a recognition that we need to move to a "Borrow-Use-Replenish" economic model. In this system, economic activity seeks to mimic the "closed-loop" systems of nature where the waste from one process (or animal) is food for another. In this way raw materials would still be extracted from the Earth, those materials converted into energy, goods and services for human use but the big difference is that the by-products of this system are either returned to the economy for future use or returned back to nature as nutrients for further use. Importantly, the goal of economic activity becomes to do it without degrading the structure and functions of the climate or natural environment. The big attraction of this way of thinking is that it represents a logical step that incorporates social and ecological well-being into our core assumptions and beliefs about what is normal behaviour. It is already in use with great success and not necessarily in the obvious industries (a carpet company in the US is a leading exponent of the model) and is beginning to attract much attention in several countries.
You may not even know today what it is you will need to grow your business in the future, but if your are keen that your company avoids what Levitt called "suicidal product provincialism", sustainability should be your key concern. The four keys to likely success are :
Make sustainability thinking integral to your business. From incorporating sustainability performance into cash bonus schemes to embarking on full-blown change management programmes, both approaches will bring sustainability into the heart of the business. This will shift perceptions of sustainability from being just 'another thing to do'. Fundamentally, this integration means redefining your organisation's view of what internal success looks like. Reward and recognise your staff for making sustainability a success.
Know the value you offer your customers. "Value" is owned by the customer, not the producer. In our current consumption-driven society, value is often associated with volume but that is to look at the process through the wrong end of the lens. There is nothing to prevent customers from deciding to equate quality with being about where and how something was made (ethically), how it can be used (efficiently) and what happens when we've finished with it (recyclable).
Start to shift your product portfolio. Either through choice editing (taking the sustainability villains off the shelves) or actively promoting the more sustainable choice (healthier, greener); start to ensure that the product portfolio begins to reflect your sustainability policy aspirations.
Innovate, innovate again, then innovate some more. From product design to service delivery, to internal and external communication, to business strategy planning, innovation is the key to delivering the holy grail of a sustainable business model.
To thrive in a climate changing world you will need to include everyone in your business and it will take forever. But that, really, is the point.
Affiliate Marketing Sites- How to Choose the Perfect Site? How to Maximize your Revenue through Blog Profit Websites? Local Marketing Sites- How Can they help you to Earn Money Quickly? Mass Email Marketing and the Elements You Should Have as part of your Mailing List Software Mayakoba Golf Classic 2011 & the Playa del Carmen Condo Market Positive aspects and disadvantages of Yellow Pages Marketing Penny Millionaire Trading Service Scam Alert Practical and Useful Affiliate Marketing Tips Advice On Getting Profits Through Blogging Why buy a distressed property in a terrible market Watch Out For The Tahitian Noni Scam! Read This Review For Info Online Drug Stores have changed the market trend Video Marketing - Why Video Just Works Better