Category: Good Growth

Malcolm Mcdonald

How Does a Good Market Strategy Help to Create a Good Company?

Corporate Social Responsibility Good Growth
Market Strategy

Transcript: How Does a Good Market Strategy Help to Create a Good Company?

Hello, everyone. I’m Edmund Bradford and I’m delighted to have with me today Professor Malcolm McDonald. We’re going to be talking about marketing, shareholder value and how that connects to being a good company.

And in this video, we’re going to be looking specifically at that link to being a good company.

So Professor Malcolm Mcdonald, thank you again for joining us.

How do you think a good market strategy can contribute to a company being a good or a better company in the future?

Some useful academic research

Well, Ed, I think of all the questions you’ve asked me over the past few years, that’s probably one of the easiest to answer and there is quite a lot of research to back up what I’m saying. Let me give you an example. I had a Professorial colleague at Cranfield called, Professor Hugh Davidson, probably quite well known to anybody who’s listening to this.

He did some research over a number of years and he wrote this book called The Committed Enterprise.  I forget how many respondents there were but I think it was something like 30 major companies that over many, many years had been successful.

And it was interesting that every single one of those organizations had been good citizens and properly embraced what we call CSR (corporate social responsibility).

A tale of two companies

If you bring yourself up-to-date and look at a company like Unilever, I was privileged to be sitting in an audience recently when we were interviewing Paul Polman who was the  group Chief Executive of Unilever. I can tell you that, and it isn’t just window dressing, every single thing that Unilever do: its ethical behavior permeates everything they do.

If I may, I’ll just read out a quote from Paul Polman. He said, “If you want to make the company grow longer-term, you have to get out of the rat race of quarterly reports and quarterly behavior. Many companies manipulate their behaviors and their spending to avoid missing expectations.”

And I mean, this is true. This is what he did and it’s quite interesting. Over ten years, the share value as tripled of Unilever. All of that hand-in-hand with CSR and good behavior. So a real exemplar.

You compare that with somebody like Enron. There may be people listening to this who can’t remember Enron. But Enron was focused on budgets and the short term, and people used to cheat and lie. And they got to the point where they even broke the law. And you know what happened to that organization.

The problem with cost-cutting

Now, just a quick aside here and that is that cost-cutting is not a strategy. I know, Ed, you’ve heard me talk about it before. I call it “anorexia industrialosa” or an excessive desire to be leaner and fitter leading to emaciation and eventually death. And I say, well, how many pence are there in a pound? How many cents are in a Euro? How many cents are there in the dollar? It’s finite. There are only so many of those you can cut.

I’m not suggesting you shouldn’t be cost-effective. What I’m suggesting is that you need to go back to the fundamentals of understanding your markets, understanding the needs of people in those markets and making an offer to them that makes people want to buy from you rather than from somebody who’s got something similar.

The goal: to create value

So to summarize this and to me, it’s easy to say this is very difficult to achieve the way Unilever has done it. But to me, what we should be doing is trying to build great relationships with markets and customers. If you can create value for customers, that’s great for those in the company who create that value. It’s great for all stakeholders and it’s great for the planet.

And that’s really where, I say, it’s not easy to do. But there are organizations around like Unilever, one of the biggest companies globally, that live and breathe good corporate behavior and the results are showing financially.

So that’s possibly not a direct answer to your question Ed, but they’re just my thoughts off the top of my head.

The moral: market strategy enables sustainability

No, you have answered it, and they’re excellent thoughts. And we’ve talked about Unilever before on these videos, and they’re a really good company to think about.

One interesting aspect of Unilever is how, when they were looking at having better labor conditions with their tea plantations.

They realized that actually there was going to be a problem if you pay your suppliers more money, of course, the danger is that you’re going to have to put the prices up, and therefore lose market share.

But they did their market research and realized that there was some price inelasticity there, and they could actually put prices up if they targeted tea in the right segment.

And I think for me, there’s a moral there that marketers and market strategy have a big role to play in companies becoming more sustainable because you can point your products, your brands, your whole company, towards those customers that are interested, that have those sort of needs.

And as you said in the earlier videos, Malcolm, try to steer away from the ones that may say they’re interested, but not when they get to the checkout and trying position yourselves better amongst the growing mass of consumers.

Let’s not forget B2B, Malcolm, the key accounts. So some people watching this may be serving Unilever. Those accounts themselves are generally interested in having a good supply chain.

Unilever has today launched a new initiative to encourage its suppliers to commit to reducing their greenhouse gas (GHG) emissions, in a bid to accelerate efforts to deliver on the consumer goods company’s target to achieve net-zero emissions across its value chain by 2039.

So marketing has got a good role to play in market segmentation, positioning, as well as helping the KAM community.

Is that right, Malcolm?

Hear, hear! Ed

Excellent. Okay, that’s great. Well, hopefully, that’s been helpful to everybody. I feel we are scratching the surface, but very, very useful.

In the final video, we’re going to get onto the subject of branding and get Malcolm’s views on what he thinks makes a really good brand.

So again, thank you, Malcolm. I look forward to catching up with you soon.

Malcolm Mcdonald

How does a Good Market Strategy Improves Shareholder Value?

Good Growth Marketing
Shareholder Value

Transcript: How Does a Good Market Strategy Improve Shareholder Value?

Hello everyone this is Edmund Bradford and I’m delighted to have with me my good friend and colleague, Professor Malcolm McDonald. We’ve done a lot of things together, both at universities and out there with real companies.

Malcolm has over 30 years I would say (without putting too much of a number on it ) over 30 years of experience in marketing and is truly one of the great marketers out there in the world and in this short series of videos we’re talking about shareholder value , we’re talking about marketing and how they both connect together and also how they connect into just being a good company. So, welcome again Malcolm and thank you for joining us. So I’ve asked now that simple question about, how does a good market strategy improve shareholder value?

Wow! Again Ed, you are known certainly to me and those who know you for asking very difficult questions and this isn’t the easiest question to answer but I will give it a go. I mean first of all to put it in perspective what are the components of a marketing strategy anyway and you know I’ve sort of made a bit of a list here it’s not complete but it’s got the essential elements in it.

First of all, you need in an organization an inspiring vision. You need clear strategies, you need rigorous segment and brand positioning, you need consistent innovation, you need superior customer value, you need high employee morale, you need tight cost control and concern for all stakeholders.

Now what could be easier than that and the thing is I’ve got 127 scholarly references which obviously I won’t bore people with today but over a long, long period, these scholarly references have drawn a link between successful marketing strategies and long-run financial success – and you know, they are very similar to the list I’ve just (you know) spoken about. I mean firstly, you know you’ve got a deep understanding of how the market works. That’s common across all successful companies.

Correct needs-based market segmentation, not that garbage that’s taught in many places about socioeconomics and demographics and geodemographics. I mean, for example, just to get it out of the way, Prince Charles and Ozzy Osborne are both in socioeconomic group A but I don’t think they behave the same!

And you’ve got understanding customer needs.  It sounds simple, hard to do but it’s a factor. And then differentiation, positioning and branding and planning for the future.

Now i know in my work, Ed, what kind of organization I’m going to be facing when I get the board of directors (the operating board of directors) and my first question to them is, without talking to each other, write down on a piece of paper (or type into your computer), “What are your key target markets in order of priority?”  The second part of that question is pretty obvious: “Against each of these key target markets what’s your company’s sources of differential advantage?”

And invariably companies that haven’t got those characteristics, instead of talking about key target markets, they start wittering on about their products. And it reminds me of (you know) the near disaster that IBM had when they thought they were in the mainframe market and more recently (oh, and Gestetner thought they were in the duplicator market) and more recently Kodak thought they were in the camera and film market and Nokia thought they were in the phones market. It’s not products – and it hasn’t been for ages – that give you differentiation and create satisfaction for customers. It’s the way you relate to your customers and your markets.

I just want to, by way of closing this off, to give you one quick example of the silly notion that people have about what is called CSR, Corporate Social Responsibility. Of course you have to have it but it has to go hand-in-hand with shareholder value-added because if it doesn’t it’s not going to work.

I give you one example there is a famous chemical company that used to be the bellwether of the British stock exchange and it was a wonderful company. It was good to its employees, loved working for it. It was good to local communities, it was good to charities and so on and so forth. The problem was, it wasn’t as good as satisfying customer needs as the DuPonts and the Siemens of the world. Consequently, their shareholder value was not in the same category and started reducing. The result of that was hundreds of thousands of people unemployed, no more money for charities, no more money for local communities and so on and so forth. So I’m afraid, in order to be a good citizen you also have to create shareholder value and I hope during these brief few minutes, Ed, I’ve given you the components of what the successful strategies are so I better stop wittering on now and say that’s my answer.

That’s excellent Malcolm and I know that you are a big believer in marketing not being in the basement of companies and in a way that it is dangerous being in the basement of companies. It needs to be in the boardroom of companies and there’s a big misunderstanding, I think, around marketing that  ‘strategy’ is done by somebody else, somewhere else. Another function, another person and marketing – I remember you saying – marketing is really the people that blow the balloons (you know) at corporate events. So I think the point you’re making is that marketing has a major role to play in actually creating shareholder value by the impact and the influence that they have on the market-facing strategy that the company is adopting.

Of course and if you think about that example I gave you when I’ve got a board of directors there and I asked them what their key target markets are and what – in order of priority – and what their sources of differential advantage are. If they can’t answer those questions, Ed, it tells you straight away that whatever they think marketing is they haven’t got it in the organization. Because what is it that makes organizations successful? It’s actually selling something to somebody, you better know who you want to sell it to, you’d better understand their needs and you’d better make them an offer that makes them want to buy from you rather than from somebody else who’s got something similar.

Now I don’t care whether you call that “marketing strategy” or what but it’s a bit fundamental and if companies can’t answer those questions then I know they haven’t got successful marketing strategies and therefore they will either be in a growth market but they won’t be profitable for long or they’re about to go belly-up because sooner or later you have to get those components in place.

Thank you Malcolm, that’s excellent. That is a huge subject as we said but we’re deliberately keeping these little conversations short.  In the next conversation we’re going to be talking about how a good market strategy helps you to be a better company. So thank you once again Malcolm and I look forward to speaking to you again shortly.

Malcolm Mcdonald

What is Shareholder Value Added and Why Should We Care About it?

Good Growth Marketing Risk
Shareholder Value-Added

In this interview we explain:

  • What is Shareholder Value-Added
  • Why is an important concept to understand
  • The importance of risk assessment

 

Transcript for: What is Shareholder Value-Added?

[00:00:05 –> 00:00:58] Edmund: Well, Hello, everyone. This is Edmund Bradford, and I’m delighted to have with me today, Professor Malcolm McDonald. And we’re talking about three things, really. We’re talking about shareholder value, marketing, and how that connects to being a good company. And in the last video, we just kind of got an introduction to the subject of shareholders and what shareholders are interested in. But I know I’ve heard about and talk about this a lot and it isn’t easy to package up into a few small minutes. I think it’d be interesting just to at least pick up on the subject of shareholder value-added, which can be very technical, but I think it’s worth just trying to get ahead around that particular area. So Hello, Malcolm, and welcome to the Interview again.
[00:00:59 –> 00:00:59] Malcolm: Hello Ed
[00:01:00 –> 00:01:08] Edmund: Could you summarize what is shareholder value and why anybody should care about it?
[00:01:08 –> 00:04:10] Malcolm: Well, I must say, it’s an enticing thought to try and make a topic like shareholder value-added interesting and exciting. It clearly isn’t other than to those people who benefit from it. In the main, these are shareholders. But let’s keep it simple. I mean, what is it? Well, everybody knows what net free cash flow is and its net free cash flow having taken account of the time value of money, and you think that’s not a difficult concept because of the time value of money, you’d rather have a pound or a dollar or a Euro today than you would in five years time. So having taken account for the time value of money, the cost of capital, which I’ll talk a little bit about because it’s not the most exciting topic in the world and of course, the risks associated with the company or the organization’s strategy. And let me give you one very simple example of this. If, for example, keeping the math simple, the cost of capital is 10% and you’re a small company and you’ve got £20,000 invested in your company. And as I say, the cost of capital is 10%. If you make a net profit net free cash flow of 1500 pounds, you have actually destroyed £500 worth of shareholder value. If you, on the other hand, make £2000 net free cash flow net profit, you have neither created nor destroyed shareholder value. If on the other hand, you’ve created, let us say £2500 worth of profit, you’ve created £500 with a shoulder value. And the question I ask most people, I say what sort of nutty what sort of idiot would deliberately set out to destroy shareholder value? Because the point is it started off with a guy called Rappaport and then morphed into what’s become shareholder value-added. Now the world is full of expressions like Return on Investment, Rona, DCF Payback, Net profit, EBIDTA, Brand Equity, Customer Equity, Customer Lifetime Value, and so on. Each one, in its own way, is very valuable and tells you something different. But the reality is that the one that has filtered to the top over the last 15 or 20 years is shareholder value-added. And, you know, if you rather than going into all the details, it’s quite important for marketers, for example, to understand what the cost of capital is because every organization has it. It’s the one hurdle you’ve got to get it over in order to justify investment funds.
[00:04:13 –> 00:05:47] Malcolm: That’s one side of it. I talked about the time value of money, the big one, however, and the complicated one is this expression. I use risk, the risk of the strategy of the organization. It’s extremely complex, and I don’t want to muddy the waters now, other than to say, you know, there’s a model called a capital asset pricing model, which explains how stock markets work. All I’d say is that, in summary, a normal, rational, risk-averse investor requires an increase in expected future returns for any more risky investment in order to compensate for any potential volatility. I mean, that, to me, is a blinding glimpse of the obvious, but risk assessment has risen very high on the agenda of those organizations and people like me who work with organizations globally in assessing risk. And the best companies in the world do assess risk. Formally, we call it due diligence, but the best companies have processes in place to make sure that they have taken account of risk in their predictions for shareholder value-added. I think probably I will stop there because, as I say, it’s not the most exciting topic in the world. But I hope I have at least explained how it works and why it is so important.
[00:05:47 –> 00:07:23] Edmund: You have Malcolm, and you’ve done that is normally when I hear you present this, you’ve got some charts and graphs and things to help. And I think in concept is actually quite simple, really, because what we’re saying is that an investor has different alternatives to where to put their money. And if you’re not delivering the minimum returns, the cost of capital that they’re looking for, they don’t need to invest in your marketing project or even your company at all. They can invest that money elsewhere and get a better return. So just because you’ve got a good payback plan, you’re making some good profit doesn’t necessarily mean that actually, you’ve reached the minimum cost of capital. And that cost of capital, as you said, is dependent on time, time adjusted returns, and is also dependent on the risk that’s factored into it. And that is a big area. And in a giving your book, for example, in marketing and finance book, you talk about different types of risk. For example, market share risk is one sort of risk. In our book we do together, there’s an implementation risk as well, that the objectives that you set out, the strategy that you laid out doesn’t get implemented successfully. So risk itself is a huge area. But I think in a way, marketers can’t shy away from it. Understanding risk and how it’s used as a major area to get head around.
[00:07:23 –> 00:07:46] Malcolm: Yeah. And I suppose it’s pretty obvious at the end of the day that if a company has a history of its profits going up and down and so on and so forth, it’s known as a volatile company, and therefore the shareholders will require a high return to take account of that risk. So it’s a pretty simple concept at the end of the day.
[00:07:47 –> 00:08:12] Edmund: Excellent. Thank you, Malcolm. Thank you for simplifying what can be very difficult and technical subject. I’m sure that’s really useful to a lot of people. In our next video, we’re going to be talking about how a good market strategy could improve shareholder value. So thank you again, Malcolm, for your time this morning. Much appreciated. And looking forward to our next conversation.
Malcolm Mcdonald

Are shareholders only interested in short-term profits?

Good Growth Marketing
Shareholder short-term

A key challenge for any company wishing to achieve long-term, sustainable, Good Growth is dealing with shareholder demands for short-term profits. But to what extent is this a real or a perceived problem?  In this interview, Professor Malcolm McDonald discusses:

  • The alignment between profits and long-term success
  • The reality of sustainable consumer behavior
  • The future trend towards sustainable corporate behavior

 

Transcript: Are shareholders only interested in short-term profits?

[00:00:06 –> 00:01:19] Edmund : Hello, everyone. I’m Edmund Bradford. In this short series of videos, we’re going to be talking about a very important subject, which is shareholder value and how it links with marketing and just being a good company. And to help us with that particular topic, I’m delighted (and I mean that from the bottom of my heart) I’m delighted to have my good friend and colleague, Professor Malcolm McDonald with us. Now, I could do a very long introduction, Malcolm, but I will keep it short. I think the only thing people need to know really, is that you’ve been in this business “for 600 years” as you would say, and you’ve written over 50 books on the subject of marketing and finance, etc, etc. You’ve got a very good book – and I don’t mind giving it a plug – called “Marketing and Finance, Creating Shareholder Value” now in its Second Edition. So if anybody wants to know more about the subject, please go and check out that book. And so you’re one of the best people. I think we could have to talk about the subject. So Hello, Malcolm.
[00:01:19 –> 00:01:21] Malcolm: Good morning. Good afternoon. Good day.
[00:01:21 –> 00:01:37] Edmund: Should we start with this simple question of what is a shareholder and are shareholders only interested in short-term profits?
[00:01:38 –> 00:06:18] Malcolm: Wow, Ed, you are a colleague and a friend, but you do ask very difficult questions. So let me think about the answer. First of all, there are many categories of shareholders, as you will know, from the individual to those who belong to things like mutual funds. For example, I’m an individual shareholder in a bank, but I also get to draw pensions from organizations like the University superannuation scheme which they invest on our behalf. And I don’t know how many of us pay attention to where they invest, but we assume that they’re decent human beings and don’t invest in organizations that are not good for our planet and society. But secondly, and I think this is most important, we know that there undoubtedly are shareholders who are not interested only in short term profits. But there’s really no conflict in this because, as I’ll show later, I hope I’ll spell out that most environmentally friendly companies also tend to be the most profitable. So there’s no conflict there. However, let me put one big “definite maybe” in here about all this, as often I perceive a big gap between what people say they’re going to do, what sounds good when being interviewed, and what they actually do. And let me give you an example. I mean, for example, more than 60% of younger consumers, according to Accenture, consider a firm’s ethical values before buying its products. The problem with that is if you look at Boohoo, for example, when it was revealed that they were paying their factory workers less than the minimum wage, did it affect them? Well, sales revenue is up by 41%. Profits increased by 37% to March 2021. And if you look at Amazon, you know, regularly criticized for their harsh employment conditions and aggressive tax avoidance measures. Yet customers spent more than £272 Billion with the company last year. And we’ll give you one last example: Volkswagen. They were found to have cheated on diesel emission tests. And yet, you know, five years later, the group achieved its highest market share ever, 22.1%. The reason, I think, is (perhaps it’s obvious or maybe it’s not obvious) that is if you ask someone, “Do you want brands to be ethical?” Nobody in their right mind is going to say, “No.” But the answer, of course, is that this social purpose will come very low on the list. Perhaps when money is involved and they get their wallets out, they get their purses out. Now, my personal view on this is that shareholders are very similar, but the consequences are grave indeed and just cannot go on. We have to change and we are changing and we will change. For example, the old Take,  Make, Waste model for the past 250 years is no longer sustainable. We just don’t have resources such as land, forest, water, metals, and mineral fuels to keep up with demand. In fact, according to Accenture, we’ll consume three planets’ worth of resources every year by 2050. And this will translate into trillion-dollar losses for companies and countries that remain tied to using these natural resources. And one last point, which I will conclude on this first question, let me say that we’re just one small step away from one lucky person, owning more wealth than the bottom half of the world’s population. Currently, it’s 62 people. Now that cannot go on. There will be legislation, if nothing else, to change that. The world cannot go on in that mode. So maybe I haven’t answered your question Ed, but they’re my rambling thoughts on the question of,  “Are shareholders only being interested in short-term profits?”
[00:06:18 –> 00:07:13] Edmund : I think that was excellent, Malcolm. I just wondered, because of course, you get different types of shareholder. Not all shareholders are created equal. And what some companies are finding is that, of course, some shareholders are actually more receptive to thinking about the long-term view, thinking about sustainability and ethics, for example. Do you think that actually, you could almost segment the shareholder market into different types of shareholders and almost in a way, they look for a balanced portfolio of products? You could also look for a balanced portfolio of shareholders with some that are more interested in the long term and some which are more interested in the short term. Can you borrow some thinking for marketing to do that?
[00:07:14 –> 00:08:11] Malcolm: Possibly that is a possibility, Ed. But all I would say is that by definition, the people who are shareholders tend to be better off people in the main, and they’re probably in the higher echelons of intelligence as well. It occurred to me that there is a change taking place, and increasingly there is a realization that it is those organizations who are good to the planet, who are also the most profitable. And I think that that will begin to come into play increasingly over the next five to ten years. So there is hope for us. And I think this endemic of short-termism is, in my perception, reducing slowly but surely.
[00:08:11 –> 00:08:29] Edmund: Thank you very much, Malcolm. That’s excellent. And in the next video, we’re going to be talking a little bit, and going to go down a little bit into a bit more detail, and talk about what we mean by ‘Shareholder Value Added.’ So for the moment, thank you very much for that Malcolm and I’m sure that has been very helpful to a lot of people.
Pooja Khosla

How “ESG” and Good Growth fits together

ESG Good Growth
ESG and Good Growth

Environment Social Governance and Good Growth companies Abstract

  • Pooja Khosla and Edmund Bradford discuss the concept of good growth and how it fits into the concept of being a good company.
  • Pooja says that ESG is designed to provide standardized metrics to measure how an organization impacts all the creatures that live on the planet, including  human beings.
  • Edmund says that investors are stepping up to utilize this knowledge to support Good Growth which is beyond and better than regular growth.

Transcript How does ESG fits into Good Growth

[00:00:08 –> 00:01:11] Edmund: Hello, everyone. My name is Edmund Bradford. I’m director of the Good Growth Academy. And in these little videos, we’re looking at the subject of, ESG   which is a major term used commonly when talking about sustainability, especially by the investor community. Today we’re going to be thinking about how ESG fits into the concept of good growth. And to help you with that, I’m very pleased to welcome Dr Pooja Khosla, who’s vice president of client development at Entelligent. Good morning Pooja thank you for joining us. So we talked to the last video about what ESG is, how it’s different from sustainability, and why it’s important. What is it designed to do and how does it fit into the kind of concept of being a good company?
[00:01:13 –> 00:02:11] Pooja: So Ed I would say that ESG is designed to measure to standardize for metrics of part of which is just sustainability. Pretty much why do we need accounting? Accounting, make sure that the financial goal of an organization was achieved. ESG is the accounting of environmental, social, and governance causes of the organization. When we talk about growth, growth alone is an incomplete concept. Growth needs a partner, a partner where the growth is beyond the financial fact sheet, where the organization can show growth from inside out in their systems, in their governance, in their contribution to the society, to the planet.
[00:02:12 –> 00:02:25] Edmund: It’s not just about this is a thing that I found interesting when delving into ESG, that it actually is not just about looking at an organization’s impact on the planet. Is it’s far more than that?
[00:02:26 –> 00:03:59] Pooja: It is far more than that. It is also looking at organization impact on the creatures that live on the planet, including as human beings. So it’s beyond environmental, how an organization takes its employees, how the organization takes its consumers, how it basically sets and grows the trust of the community that supports that organization. So it is much beyond just contributing to the planet. It is contributing to the people on the planet as well as to the other creatures. Like, look at the impact on biodiversity. So it contributes to everyone, every creature that lives on the planet. So in order to make sure that we achieve good growth, it is time when we think beyond financial returns. I know financial returns are the fiduciary responsibility of everybody, but we have to consider environmental returns, social returns, governance returns pretty much on par with financial returns. If we have to focus on good growth and good growth is the best way to grow, it is to grow with trust. It is to grow with confidence. It is to grow with the value creations of all stakeholders rather than just value extraction.
[00:04:00 –> 00:04:39] Edmund: From your work with the investor community. Have they suddenly all become angels now, the investor community? As I said, well, we’re doing this because actually, we all want to be good investors, et cetera. Or is there just some really hard business cases out there and evidence and research that suggests that having a company with really good leadership, I’m thinking about companies like, Unilever than really trying to become a good company? Is there more and more evidence now that investors are seeing that most of the companies or actually give them better returns?
[00:04:39 –> 00:05:57] Pooja: So and I would not say angels and demons over here, rather, I would be scientific being a scientist, it’s about information. Like even when we talk about efficient market hypothesis, perfect information is very important. Before today, before the ESG, there were a lot of blind spots. But today, because of a lot of forms, a lot of data and research companies jumping in to measure the impact of the organization on the environment, social, and governance with respect to recent technology, Artificial Intelligence, and big data. With respect to regulatory push on reporting, more companies are reporting than ever before. There is a lot of information now with this rich information. Investors have more knowledge, more guidance than they used to have before. And investors are stepping up to utilize this knowledge, this guidance to support good growth that is beyond growth and better than growth.
[00:05:57 –> 00:06:36] Edmund: Thank you, Pooja. That’s excellent. That’s very helpful. I feel like we should talk about this all day, but I think that’s really been helpful so far. In the next video, we’re going to be talking about one specific area of business with which we were involved, which is marketing, and why ESG is particularly impactful for the marketing profession. But until then, thank you very much. Put of your time. Very helpful as ever. And I look forward to our next video. 
Stephen Mangham

How can sustainability be a real differentiator for companies?

Good Growth Sustainability
Sustainable brand

In this video:

  • Edmund Bradford and Stephen Mangham discuss how “sustainability” and “good growth” can be real differentiators for customers and other stakeholders
  • Stephen explains that consumers are more attracted to brands who have a social purpose.  There is far more interest, awareness and expectations from consumers that companies are making a positive difference to the world, or at least mitigating any damage they may be causing.  “Sustainability” therefore, must be a strategic imperative.

Transcript

The timings are shown to help you jump in to the video at the right point if needed.

[00:00:09 –> 00:01:10] Edmund: Hello, everyone. I’m Edmund Branford. I’m a Director of the Good Growth Academy, and I’m delighted to have Steven Mangham with us today, who’s a branding expert and a master at Masters of Scale International. Now, in the previous video, we talked a little bit about sustainability, good growth, and marketing, and just getting our heads around the concept a little bit. Whereas in this video, I think it’d be really nice to talk about how sustainability and good growth can be a real differentiator for customers and perhaps other stakeholders in the marketplace. So, Steven, thank you again for joining us. What are your thoughts on how sustainability can be not just a box-ticking exercise for suppliers when filling in tender documents, etcetera, but more of a real differentiator, either in B2B or B2C? 
[00:01:10 –> 00:02:22] Stephen: Well, it’s not new news that consumers are more attracted to brands with an attractive point of view on the world who are promoting a sense of usefulness. I remember when I worked on Coca-Cola Live Positively back in 2010 (so it was a long time ago now,) and there was a lot of day-after recall research evidence that said that the advertising that had the most impact in terms of memorability and persuasiveness were the ads that carried social purpose messages. And there’s a wealth of evidence out there in the last few years that – all other things being equal – consumers would prefer to buy a brand that has an attractive social purpose over one that doesn’t. There’s absolutely a strong consumer reward if you can communicate and articulate a strong set social purpose for your brand.
[00:02:22 –> 00:02:31] Edmund: And do you see that both changing and getting stronger in B2C and B2B situations?
[00:02:36 –> 00:04:06] Stephen: Broadly, yes. Certainly from a B2C point of view, there’s far more interest, awareness and, frankly, expectations from consumers that they expect that companies and brands are doing something positive for the world or at least mitigating any damage they may be causing. And that’s getting stronger and stronger. And of course, with a social media-driven world, there are constant conversations all the time about how well brands perform in this way or not. So you can’t ignore this as a brand today. From a B2B point of view, I think, to be frank, every customer and every stakeholder now has an interest and an expectation when it comes to these matters. For example, if you look at the growth of ESG-driven investors, it’s a common question today in analyst meetings, “What’s your ESG strategy?” If you don’t have one, those investors may think twice about investing in you.
[00:04:07 –> 00:04:39] Edmund: And there are very interesting stats now on ESG investment. I think it’s interesting, isn’t it, that a lot of this change is being driven both from the customer side, as you talked about, but also from the investor side and from the government side as well. And it’s almost like this perfect storm now of a force pushing companies towards more of an ESG compliant future, whether it be B2B, B2C or other situations.
[00:04:39 –> 00:04:42] Stephen: Absolutely. Because of all of these stakeholders.
[00:04:45 –> 00:05:07] Stephen: They are both very aware of the wider expectations of the people they serve. And then as individuals themselves, there’s an awful lot of them are thinking it’s important that we do this anyway. So I think, as you say, it’s something of a perfect storm. You certainly can’t ignore that today.
[00:05:07 –> 00:05:57] Edmund: I think from my perspective, maybe more than the B2B space than the B2C space. I think it used to be an old tick box exercise. I have one client I’ve been working with for over 15 years, and their client is Unilever. And so in the past, Unilever has kind of just said “Tell us what you are doing doing on sustainability” and fill in this space on the form.  You’ll get the tick in that bit and then it’s on to the other aspects of the service. But now you can’t do that anymore. It’s about “I want to know what you’re doing. What metrics are you going to be using for measuring the change? When is it all going to happen? I want concrete plans. And by the way, if I’m not happy about it, you’re not a supplier anymore.” So it’s much more of an order qualifier now than just a little bit of icing on the cake.
[00:05:57 –> 00:06:31] Stephen: Absolutely. And also, as we said in the previous interview, it’s not about being looking at sustainability as a useful add-on, or it’s some additional measures that you’re taking. Is it at the heart of everything you’re doing? Is it a central part of your strategy? And I think that’s a major shift. And I think companies like Unilever, for example, I know, are expecting from their suppliers that they want to see that sustainability is a strategic imperative for their suppliers as well as for themselves.
[00:06:32 –> 00:06:49] Edmund: That’s excellent. And, of course, the heart of all this, we have this Chief Marketing Officer trying to get their head around it. Trying to make it all work. And in the next video, we’ll talk a bit more about the marketing function and the Chief Marketing Officer. Steven, again, thanks very much for your time.
[00:06:50 –> 00:06:50] Stephen: My pleasure.
[00:06:50 –> 00:06:53] Edmund: I look forward to our next short video in the series.
[00:06:53 –> 00:06:54] Stephen: Thank you.
Edmund Bradford

What is “ESG” and why we should care about it?

ESG Good Growth
ESG

An interview with Dr Pooja Khosla

When discussing sustainability, “ESG” often comes up. What is it and why should we care about it?

To help answer these questions, I interviewed Dr Pooja Khosla, Vice President of Client Development at Entelligent.

Her thoughts can be summarized in three key points:

  1. “ESG” is about measuring how the actions of companies, consumers, investors and all stakeholders impact broader society.
  2. Before the industrial revolution, companies were focused on value creation. After the industrial revolution, the focus shifted to measurements of financial results and therefore value extraction.
  3. If “sustainability” is the destination that stakeholders want to reach, then “ESG”  is the measurement of progress towards that destination.

Transcript

The timings are shown to help you jump in to the video at the right point if needed.

[00:00:09 –> 00:00:48] Edmund: Well, Hello. I’m Edmund Bradford. I’m a director at the Good Growth Academy and in these short videos, we hope to help give people an understanding of some of the key areas around sustainability. In this little video, we’re going to talk about a term that you hear quite a lot when people are talking about sustainability, which is “ESG.” To help me with that, I’m delighted to welcome Dr Pooja Khosla, who is Vice President of Client Development at Entelligent. Good morning to you.
[00:00:48 –> 00:00:50] Pooja: Good morning, Edmund.
[00:00:50 –> 00:01:17] Edmund: Welcome to this little video. ESG is something that we hear all the time, and it’s a big abbreviation. It’s used a lot by a lot of people. Would you like to just give our viewers some background as to what it is and why, if you haven’t heard of it, why you should take ESG seriously?
[00:01:17 –> 00:03:17] Pooja: So, Edmund, I feel that when we started trading, when we started development, when we started to learn about business, ESG was always there because of all business. Initially, I’m talking about the Greeks. I’m talking about the era before the Industrial Revolution. All businesses were created for the purpose of value creation. There was always an exchange of value and how value can impact society, how value can improve or develop our state of living, or can add to our current living standards. But after the Industrial Revolution, there was a lot of focus on profits, the balance sheet indicators. The financial back sheet got more attention than the sustainability and development back sheets. Then there was a switch. Instead of value creation, people started believing in value extraction. That is what we see was happening earlier. Lots of value extraction . That is why we have to go through the climate emergency issues, exploitation, labor exploitation issues, lack of governance issues. I believe now it is time to take a U-turn. It is time to go back to the original concept that is value creation, because that is a pathway of sustainability, and we have to do it soon. We have to do it fast. We have to make a U-turn today and not wait for tomorrow.
[00:03:18 –> 00:03:47] Edmund: That’s very interesting Pooja.  By the way.  I have spent the last 25 years of my life working with companies and students trying to help them understand the importance of value. Value is such an important term in marketing as well as in shareholder value, etcetera. So I think it’s absolutely a very good point. And so what does ESG mean to start with and where does that fit into value creation?
[00:03:47 –> 00:04:16] Pooja: So ESG means Environmental, Social, and Governance. That it is much broader than the full form of this acronym. It is how actions of corporations, companies, consumers, investors and all stakeholders impact the broader society. A lot of people confuse ESG with sustainability, but they are very two different concepts. Sustainability is the destination that we want to reach by our actions. ESG is a pathway, a GPS, to this destination.
[00:04:45 –> 00:05:17] Edmund: And by the way, you’ve done a very good article on that whole point, I know, for us. So on that very point, Yes, people, please do read this article, which is on our Good Growth Academy blog. You were helpful in helping me understand this. So would you say that ESG is kind of the measurement of our progress to that destination? Is that what ESG is trying to do?
[00:05:18 –> 00:05:51] Pooja: Absolutely. ESG is how we can measure how we can look into that RV on the trajectory that we intend to be on our sustainability course, to set metrics, to set measurement, to set standardization, to set compliances. And we all know that what can be measured can be managed. So ESG is the first step to manage sustainability.
[00:05:52 –> 00:06:17] Edmund: Absolutely. And I think from my point of view, looking at it fairly new, I think, in comparison to you Pooja in the sustainability area, it seems to me that not only has there been an explosion in interest in sustainability, but of course,  also the whole metrics around how you measure sustainability has also exploded hasn’t it? Which is why we hear ESG mentioned so often, especially by investors, for example.
[00:06:19 –> 00:07:37] Pooja: That is so true. That right now, especially during the Covid era and two years before that, the interest in sustainability has exponentially increased. To be very honest, I am in this field when this field was called development economics, and then we graduated into fancy acronyms like ESG, SDGs, SRI, PRI, and all but the hard nice in development economics, how we can make our economy, business and finance revolve around real development. Development is very different from growth. Growth can be measured because it’s a  monetary term. It’s the financial faction: growth accompanied by contribution and improvement and standard of living,  lifestyles, betterment of humanity, betterment of the environment, betterment of governance. That is development. So absolutely, we need to look into ESG from “transparency towards development,” which is growth! Growth is a part of it.
[00:07:38 –> 00:08:07] Edmund: That’s excellent. Thank you, Pooja. And that’s been a really useful conversation for me as well. We will pick up on this subject of growth in our next video. So hopefully that has helped people understand ESG, why it’s important and how it’s different from sustainability. We’ll look at how it links to good growth in our next video. So thank you, Pooja and I look forward to connecting with you again soon.
[00:08:08 –> 00:08:11] Pooja: Thanks. It was a pleasure being here with you today.
Good Growth Academy

3 Vital Steps to make the Transition to a Good Growth Company

Good Growth Sustainability
Good Growth

Summary:

  • Making the transition to a sustainable  Good Growth Company requires significant change. Yet people often fear and resist change when it is driven by other people.
  • However, there are 3 core steps that will help you make an effective transition. They work because they recognize the importance of involving people in the change.
  • The steps are: create a clear need for change, share a compelling sustainable vision of the future, and create opportunities for involvement in the transition.

Introduction: what to do first?

So, you have decided to transition your organization to becoming a Good Growth Company (GGC) by focussing on delivering sustainable profits through sustainable and ethical growth in line with the Sustainable Development Goals defined by the United Nations. But this type of change is never easy. We all fear the unknown and especially change which is controlled by other people. We also have to push ourselves to break our old practices and embed new and more helpful ones.

How can you achieve a transition to good growth through good sensible leadership practices, in a way that values your people and their contribution to your company?

Three common change leadership mistakes to avoid

There are 3 mistakes which many leaders make when driving change in their companies:

  1. They do not explain why the change is necessary. They are obviously familiar with the reasons for the change and might even think that the explanation will demotivate people (and this is a danger) but more commonly, demotivation comes because people feel alienated from what is being proposed.
  2. They explain what will change but not what the change will deliver. This means that the members of staff in the company do not understand how the company or they themselves will benefit from what is happening.
  3. They drive change at pace because they know what needs to happen and this makes them feel comfortable. Sadly, the staff feels uninformed, uninvolved, and untrusted.

However, there are three change leadership steps that good leaders can use to create direction and momentum in major change initiatives:

Step 1: Create a clear ’need for change’ picture.

Step 2: Share a compelling vision of the future.

Step 3: Create widespread opportunities for involvement

Step 1: Create a ‘need for change’ picture

In thinking about the transition to a GGC, you as the leader of the organization will have thought a lot about the destination you want to reach. However, if this is the starting point of your engagement with your employees or colleagues, there is a danger of this seeming to be a personal crusade. If you have ever heard anyone describe a change as “change for change’s sake” then the leader has not answered the vital question of why the change is necessary.

The starting point for communicating the change needs to be why change? The more your staff can understand and feel the need, the more they will be driven to make the journey.

The ‘need for change’ might already be clear for your organization. There might be a clear outcome if you do not change – you might lose customers, costs might escalate, or you might become an also-ran in your market. This will make a need for change picture easy to create and easy to communicate to your teams. The only danger will be if you oversell it and make people feel as though you are threatening them.

On the other hand, your wish to become a GGC might be driven by a conviction that there must be a better way rather than the “writing being on the wall”. In this situation, it might be that your organization could successfully continue as it is, but you all agree that it would not be the place of which you are proud, allowing you to adhere to your values and convictions and stand out from the mediocre crowd.

You should not miss good opportunities to involve your team in developing the need for change. You might share your observations and some of your conclusions and ask them what they make of your observations, how they read them, whether they see indicators which say the same thing or even show a contrasting picture. Avoid asking ‘closed questions’ to which the answer is yes or no, for example, “Do you agree with me?” These questions are unlikely to promote openness.

You will know that it is time to move onto the vision when the questions and comments begin to ask, “What is to be done about it?” Be prepared to explain the next steps clearly.

Step 2: Share a compelling sustainable vision of the future

Having convinced your team that change is necessary, it is important to describe to them what you intend the future organization to be like. This vision should link to the need for change by showing that if the vision is achieved, the issues raised in the need for change will have been addressed.

It is also important to note that the vision might be a stretch in both imagination and practice for those who see it. Therefore, it needs to be clear to everyone that it is consistent with the past successes and capabilities of the organization.

The best visions are the ones that show the proposed future is a logical next step in the organization fulfilling its original purpose and values.

Above all else, the vision of the future should excite those who hear it. The vision should describe an organization in which they can see their values, that is, those of which they are proud. It should propose a challenge but also it should be achievable even if success is some way down the line.

The vision should be tangible and not an unrealistic pipe dream.

As discussed in the previous step, encourage discussion about the vision of the future. You may present a developed vision and ask for structured feedback using questions like, “How do you see the organization in the future? How does the vision make you feel about the future?” As before, avoid asking closed questions and “leading the witness.”

It might be that having shared the need for change in Step 1, you can then, in this step, involve your team in co-creating the vision of the future. My experience is that this is best done in small groups rather than one large group.

It might be that having shared the need for change in Step 1, you can then, in this step, involve your team in co-creating the vision of the future. My experience is that this is best done in small groups rather than one large group.

It is also essential that you discuss how the organization of the future might serve its external audiences like its customers, partners, and investors. It is always tempting to devote much time to talk about “our values” and what we can expect for ourselves, but introspective organizations can easily become self-absorbed and in the end, they can lack a driving purpose.

Once you have shared the vision be prepared to explain what will come next and what opportunities there will be for your team to be involved in the transition.

Step 3: Create widespread opportunities for involvement

We all know that when someone else makes a change that impacts us, it frequently induces fear because of the loss of control and the unknown future. However, when we make changes for ourselves or when we are involved in a change in our company, the involvement creates more of a sense of control and an understanding of the future. Both of these reduce the feelings of fear.

Great leadership is not achieved by pushing your ideas about the future onto your fellow leaders and all your team members. This will make you feel better, but it will make everyone else’s change more challenging. It may also lead others to question your espoused values.

One way to manage this dilemma is to “give up control to gain control”.

By creating opportunities for your team members to be involved in shaping the decisions and the implementation of change, you will support their change journey. After all, if they can see what you see about the world and the organization, will they not be able to draw the same conclusions?

In any discussion of change leadership, most practitioners place a high emphasis on the criticality of communication. It is true that communication is a vital component – our teams have to know what is happening. However, communication can be quite passive. The speaker does not have to relate to the audience or engage personally with the listeners, and the listeners in turn do not have to engage with the speaker or the content.

As leaders, we cannot (and would not) want to compel involvement, but most people will accept the opportunity to contribute provided they believe the opportunity to be a real one. The most important groups to involve are those who already have leadership responsibility in the organisation, and these are often the hardest to involve.

Any wise leader will involve the leadership team in shaping decisions. Merely consigning them to a role of making a Go / No-Go decision on a fully developed proposal wastes an opportunity to include their experience at best – and at worst it will alienate them.

Other groups should also be involved, both for the good of the program and for the good of them as individuals.

Examples of involvement opportunities include:

  1. Educational workshops at the start of the programme to share the principles to be used.
  2. Programme launch.
  3. Proposal / solution development.
  4. Implementation planning.
  5. Specific implementation issues and tasks.

Any involvement opportunity should be well facilitated as this will ensure that the involvement opportunity is seen as genuine. A time of open questions is always essential at these events as it reinforces the value you place on involvement.

Conclusion

As a leader wanting to transition your organization to become a GGC, you have already decided that you want to build your organization around the value you place on your people. By following these 3 vital steps you will demonstrate this value in your transition process.

 

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