4 steps you can take now to better manage long-term risk for your business
What you’ll learn:
- Risk Manage Like Your Customers: 4 steps to take now in preparation for future risks (and why you may want to do this for your customer, too)
- Why Patagonia has the best reputation among 100 of the most visible companies
- How dinosaur surgeons saved Best Buy
Verde Consumer Behavior Report - june 7, 2021
Buried deep below the fold of this past year’s negative headlines is a treasure trove of solutions. They’ve not all been perfect or even always effective, but a step in a better direction is almost always more desirable than stagnation.
Just scratching the surface of solution-oriented ideas that have become prominent in the past 14 months, consider: curbside delivery, improved online shopping experiences, last mile solutions, take-out margaritas (!!), free hand sanitizer, more clarity in signage, and so many more.
The pandemic is not over and the quick turns of news can still give you whiplash. Regardless, recent CDC guidance loosening mask protocols for vaccinated people has upped the hope quotient for the whole country. If you haven’t already been strategizing for long-term development, there’s no time like the present!
This week’s theme is solutions.
Manage Your Long-Term Risks in Part by Honoring Your Customer’s Long-Term Risks
The pandemic brought risk equations into our daily lives--as individuals and as businesses. It’s been a near constant parade of risk/reward calculations, and we can’t take our feet off the gas pedal(s) yet.
It’s human nature to downplay or disregard risks that seem unlikely or too far into the future. Companies do the same. None of us know what the next mega-challenge will be, though climate change, further supply chain disruption, cybersecurity, and data privacy are good bets. For the outdoor industry, specifically, it may be a decline in participation after the pandemic-fueled surge in 2020. (We’re working hard to ensure that’s not the case.)
EY provides four steps you can implement now to manage long-term risk:
Envision future states and plan for risks
Ensure leadership teams represent a cognitive and experiential diversity that will support a broad range of thinking
Map “trust journey” to prioritize risks
Start with your most valued stakeholders
Quantify risks as possible
Try to assess the probability, the potential impacts, and the correlation with other risks
Build flexibility into strategic planning
E.g. build global supply chains with redundancy and flexibility
Our take: How does this high-level strategic planning translate into daily operations? It’s an insightful way to better serve your customers. Run through the exact same process for your consumer. What risks might they be managing now and for the long-term? How do you demonstrate that you have their long-term interests at heart? Whether it’s fiscal or health-related, most people are focused right into building long-term security into their lives. How can you help them quantify the risks and benefits of doing business with you?
McKinsey Predicts...
According to the researchers at McKinsey & Company, “...the pandemic’s uneven impact on workers, consumers, and companies threatens to create a two-speed recovery that widens inequality while delivering tepid growth.” [In the article, McKinsey approaches income inequality from an economic point of view, not invoking the politics, social justice, or philosophies that also shape the discussion.]
If you’re reading this, there’s a good chance your target audience is relatively affluent. That may provide a feeling of insulation from an economic downturn. McKinsey is saying...not so fast.
The analysts call for bold and intentional actions by companies and policymakers to address these emerging income gaps, saying that otherwise our immediate and long-term economic recovery will be weaker and less resilient. Their findings are supported by post-crisis economic recoveries in recent history (post-WWII).
The bottom line is that only consumers with money to spend can drive demand. The pandemic has disproportionately hurt lower income individuals, so without focused solutions, a huge swath of the U.S. population will see even further declines in their purchasing power. For retailers and manufacturers, this means the potential customer base will be drastically limited.
Wage increases for the traditionally lower earning positions are a key part of the solution, according to McKinsey. Other measures that companies can enact on behalf of a more resilient GDP/economy are:
Focusing on higher productivity
Ensuring technology and digital efficiencies are understood and adopted throughout the entire organization
Planning for and mitigating workforce disruptions as workers transition to better-paying jobs that require new skills
Evaluating supply chains and enacting versatile payment and delivery policies in order to support smaller and mid-size suppliers (as many did over the past year)
McKinsey suggests that bold action is required. Companies and policymakers responded to COVID-19 disruptions with remarkable speed, creativity and resilience. Those same qualities are needed once again to foster a more resilient, balanced and strong economy in the long term.
Our take: It’s difficult to discuss income equality without tilting to politics, and that’s not the focus of these reports. We’d like to address this topic from a brand communications standpoint. How a company treats its employees reflects on that brand’s values. This encompasses wages, benefits, perks, workplace culture, training, technological support, career development and more. Additionally, how a company selects and manages its supply chain reflects its values.
We know that today’s consumer wants to buy from brands whose values align with their own. There isn’t an easy equation to determine if increased employment costs will be offset by acquiring new values-based customers. Nor can we precisely determine how many people might transition into your potential customer base if they earn higher incomes. From a strategic standpoint, there is value in being a “great place to work” and in providing livable wages.
Patagonia Takes Top Honors in Reputation Rankings
Results of the 2021 Axios-Harris Poll 100 came out on May 13, 2021, and Patagonia bested innovators and crowd pleasers like Moderna, Chewy.com, REI and Tesla for the top spot.
The pollsters select the 100 “most visible” companies in America according to news coverage and general top of mind awareness at that time, so the list changes from year to year. Then, 42,935 people vote for companies based on seven criteria: trust, vision, growth, products and services, culture, ethics, and citizenship.
“Products, performance and – more than ever – purpose are driving the reputations of America’s top companies and their leaders,” said John Gerzema, CEO of The Harris Poll. As the brand’s press release states, “Companies with a clear point of view and that deliver not only great products, but also an impact on society have the best reputations.”
Our take: What every brand can learn from Patagonia is clarity, transparency and commitment. Consumers know exactly what Patagonia stands for, which makes it easy to support the brand when their values align. Further, Patagonia has led the way in transparency around product development, manufacturing and operations. The brand regularly owns up to its negative impacts and opportunities to improve. Consumers appreciate being told the truth and accept that progress is often imperfect. Patagonia is clear about its commitments, whether those are to employee wellness, a cleaner supply chain or voting access. The brand has an exceptional track record of acting on its commitments. This has developed a culture of trust with its customers, who have no reason to doubt the brand will continue to act on its loyalties.
News Flash: Let Employees Be Human
Quick! When we say, “Foster human connection,” what strategies do you think of? Social media? A blog? Contests? Events? A launch party? Flattering lights in dressing rooms?
As reported by Harvard Business School Working Knowledge, a recent book by the CEO of Best Buy, Hubert Joly, says it begins by treating your employees with respect and giving them the latitude to find solutions. (Yeah, we knew you knew that one!!)
Joly took over at Best Buy in 2012 when stocks were at $11/share and the profits for the most recent quarter were down 91%. A few strategic activations saw the stocks triple by 2013. But it wasn’t until Joly’s humanistic approach became fully-engrained company-wide that the organization truly rebounded. In 2020, stock prices were $110/share.
Joly’s philosophy of leadership is to foster a culture of joy and autonomy among employees and customers. His five ingredients are (loosely quoted):
Most people truly do want to make the world a better place. Connect employees with what drives them, which typically includes making something at least a bit better.
Allow for (and foster) genuine human connection among employees and customers.
Give autonomy to team members, as much as possible. Avoid scripts and formal “rule books” for action.
Institute one-on-one coaching to give employees individual training and feedback.
Create a growth mindset to continue to improve.
Essentially, give employees the space and the authority to brighten someone’s day. In a particularly charming example, two Best Buy employees delighted a 3-year old when they pretended to do surgery on his broken pet dinosaur. Much to his mom’s delight, they surreptitiously exchanged the T-rex with a new one without the kiddo knowing. It probably took longer than a “typical” exchange. And Jurassic surgery is hardly in the Best Buy realm of expertise. But the customers left happy, and the employees had a sense of both joy and ownership.
Our take: We suspect 8 out of 10 specialty businesses are rolling their eyes with the simplicity of this advice. Of course, treat your employees well and encourage them to treat customers well! It would be a no-brainer, if it weren’t easier said than done. A sense of camaraderie and ownership genuinely matters to most people. We all want to bring a great idea to our boss or be one of the reasons a customer returns. Giving your employees the opportunity to contribute to a better environment is a direct pathway to satisfied customers and higher retention rates.
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