8. Game Changers

Concepts such as corporate social responsibility, eco-tourism, environmentalism, and “green” products have become increasingly more important to both consumers and businesses in recent years. So has the growing concern over companies that exploit child labor, disrespect diversity, or ignore personal and environmental safety. Values are no longer a nice-to-have. They are growing in awareness and significance as a key business success factor—and becoming an expectation we have of the companies that we do business with.

While a select few companies would dare say values and core purpose drive business success, others are courageously beginning to use this as a means to differentiate their brand and their company. They have abandoned the old ways of doing business and have chosen a new business model that operates with integrity, values, purpose, passion—and yes, profitability.

Purpose-Driven Companies Are More Profitable

A new kind of business referred to as Firm of Endearment (FoE) describes companies that embrace this operating philosophy. The book Firms of Endearment illustrates the fascinating connection between operating a purpose-driven company and financial outcomes. The authors researched companies people truly love and respect and compared traits each firm has with key stakeholders in five groups: employees, customers, suppliers, society, and shareholders. Similar to The Fortunate 500, in an FoE business model, no stakeholder comes first. FoE companies achieve their financial objectives through endearing themselves to all stakeholders by addressing their needs.

According to Firmsofendearment.com, “These companies pay their employees very well, provide great value to customers, and have thriving, profitable suppliers. They are also wonderful for investors, returning 1025 percent over the past ten years, compared to only 122 percent for the S&P 500 and 316 percent for the companies profiled in the bestselling book Good to Great—companies selected purely on the basis of their ability to deliver superior returns to investors.”1

Who are these companies? Only 28 companies meet the criteria for being an FoE company. Amazon, eBay, and Google are just a few. Check out www.firmsofendearment.com to learn more.

FoE are known for challenging industry standards and beliefs, operating with great transparency, decentralizing decision making, and operating with the company’s long-term interests in mind. Because these companies favor organic growth and don’t believe in traditional tradeoffs (such as blending work and play), they attract loyal employees who are usually paid more than industry averages. Loyal employees attract more customers and increase customer loyalty, resulting in improved bottom-line measures of performance.

What can you learn from companies like this? It pays to be nice (and it’s a lot more fun!)

New Belgium Brewing: Passionate About Purpose, People, Sustainabilty, and of Course, Beer

New Belgium Brewing founders Kim Jordon and Jeff Lebesch met over a beer at a friend’s house in 1990. A year later, they founded their own brewery, which has grown to become America’s third-largest craft brewery and the eighth-largest overall with sales of $96 million in 2007 and projected to grow eight percent in 2008. As of August 2009, the brewery grew to 348 employees who are as passionate about the company’s purpose as the founders.

Purpose is a powerful driving force at New Belgium. Even before the first beer was bottled and sold, Jordon and Lebesch decided to craft a vision and values that would make their new company a direct reflection of their personal core values. They hiked into the woods with a jug of beer, pen, and paper, to craft a vision for the company they wanted to create. This vision, “To operate a profitable brewery which makes our love and talent manifest,” is still the driver of their success today.

Part of what their love and talent manifest is their strong belief in sustainability. As early adopters to the movement toward sustainability, employees voted to make New Belgium Brewing the first 100 percent wind-powered brewery in 1998, even if it meant forfeiting their yearly bonus. That first vote created the momentum for the significant progress the company has made, and continues to make, in their commitment to sustainability. A few of their goals are to reduce their carbon footprint by 25 percent, reduce water usage by 10 percent, offset eight million car miles in the next year by riding bikes (Team Wonderbike has over 10,000 member pledges), and many other projects you can review by visiting this section at www.newbelgium.com/sustainability. The company is also a member of 1% for the Planet, meaning through donations and fund-raisers, the company contributes one percent of their revenue to environmental non-profits.

The company founders and employee owners clearly put actions behind their words. A key business practice that drives the company culture of commitment and execution is a policy of open book management. New Belgium Brewing shares financials, business strategies, and branding plans, creating a culture of transparency that fosters trust and respect. CEO Jordon says, “We care deeply about one another, and we also care deeply about being very good at what we do.”2

The result of New Belgium’s passion and purpose tied to business practices is an amazing employee retention rate of 92 percent. On one-year anniversaries employees are rewarded with a bike (the one famous on the Fat Tire label) and stock ownership. Employees who have been with the company for five years are rewarded with a trip to Belgium.

New Belgium Brewing Purpose Statement

To operate a profitable brewery which makes our love and talent manifest.

Company Core Values and Beliefs:

1. Remembering that we are incredibly lucky to create something fine that enhances people’s lives while surpassing our consumers’ expectations.

2. Promoting world-class beers.

3. Promoting beer culture and the responsible enjoyment of beer.

4. Kindling social, environmental, and cultural change as a business role model.

5. Environmental stewardship: Honoring nature at every turn of the business.

6. Cultivating potential through learning, high-involvement culture, and the pursuit of opportunities.

7. Balancing the myriad needs of the company, our coworkers, and their families.

8. Trusting each other and committing to authentic relationships and communications.

9. Continuous, innovative quality and efficiency improvements.

10. Having fun.

Source: New Belgium Brewing

Many companies develop exceptional statements reflective of their purpose, but fail to execute in a way that employees are inspired and motivated by them so that their behavior is a mirror reflection of the company’s values. If your goal is to create a great company known for its values, culture, and unique customer experiences, you have to go far beyond just creating great vision and values statements. It’s all about execution, and it’s surprisingly harder to do than you think. It takes commitment, relentless focus, and dedication. In Section VI, “Execute and Evaluate,” we will discuss specific actions you can take to create and build your own culture of excellence.

A Strong Internal Brand Equals a Powerful External Brand

It makes complete sense that cultivating a thriving internal brand would be reflected in a stronger and more powerful brand externally. It not only serves to differentiate a business in a competitive market, it also drives down marketing and branding costs. A common benefit of companies with strong internal brands is that they spend considerably less than other companies on sales and marketing.

Scott Bedbury is one of the leading marketing and branding experts in the world. He built the Nike and Starbucks brand from their infancy to become among the world’s leading brands. I had an opportunity to interview Bedbury and ask him how he did this. As you will see, it was not through cleaver marketing strategies and tactics. It was a relentless focus on the company’s purpose.3

“Just Do It” Campaign Among Bedbury’s Accomplishments

Scott Bedbury, former senior vice president of marketing at Starbucks, was instrumental in creating the Starbuck brand. Prior to that, he was head of advertising for Nike, where he launched the “Just Do It” campaign. A resident of Seattle, he is CEO of Brand-stream, an independent brand consultancy.

Reece: How do you build a great brand?

Bedbury: With people that are passionate and care about the company and the brand. Every great brand starts with a passionate, visionary CEO, like Phillip Knight at Nike and Howard Schultz of Starbucks. They focused on creating a great product. But what increasingly separates product A from product B is how people feel about the brand and all the details that go around the experience—what happens after you buy and how you are treated during the purchase.

Reece: At Nike, you had a multi-million-dollar ad budget to help you build the brand, but at Starbucks you spent very little money on advertising. What did you focus on to build the Starbucks brand with a limited budget?

Bedbury: The “Just Do It” campaign was launched with $8 million, and when I left, we were spending $200 million on media worldwide. At Starbucks, Howard realized the single most important thing was the people, and what set Starbucks apart was the health benefits and stock ownership for people who work part time. It had never been done before, and it came with a cost.

The dollars to build the brand were put into operations to create an experience that would enable the brand to endure and be sold profitably for many years to come. It really came down to experiential marketing.

The stores were once four white walls. There was no comfortable furniture or fireplaces or music. So we set out to create an experience in the stores and a level of brand equity that most traditionally marketed brands couldn’t touch. That meant constant creative development of products, and the look and feel in the stores. It wasn’t cheap. The first year, we spent $100 million building out stores, which is a significant marketing budget for anyone.

Reece: Did you set out with the mission to define your brand by focusing on a stock option and employee benefit plan or did this happen by accident?

Bedbury: That was Howard’s mission. When he took over the company, he was not a rich man and he didn’t own a house or even a car. Howard grew up poor in Brooklyn and was influenced strongly by his dad, who never got health benefits from any of his employers. This fueled Howard’s drive to create a company that put employees first.

He is passionate that when it comes to customers versus employees, employees will always come first. He knows if he does this, he has employees that value their job, and if they feel valued and respected, they will in turn take care of customers—and that formula has always worked.

Reece: It really has worked. Why don’t more companies do this?

Bedbury: It takes a lot of courage. When Howard tried to raise $2.8 million to buy the company from the three founders, he made 220 presentations and he got shut down in all but 12 of them. He was seen as an idealist who was going to put an unnecessary burden on the bottom line by offering benefits to part-time employees who viewed this as a temporary job.

But Howard convinced them that turnover would drop, which it did. Store manager attrition was 15 percent, part-time hourly employees was 65 percent, compared to McDonalds and Taco Bell, which were about 200–300 percent a year. That’s turning over your work force every four months, and when you do that, your service suffers and there are all kinds of problems. I don’t know why more people don’t do it. If you give up some equity to employees, they’ll reward you for that.

Reece: When will people cease to pay $5 for a designer cup of coffee?

Bedbury: I don’t think they ever will. I have a Starbucks close to my house in Seattle and I go there for the coffee and also for the peace of mind and to see friends. It’s not just about the coffee; it’s about the experience.

Reece: What are the most important things you learned from building two of the world’s leading brands?

Bedbury: The No. 1 thing is everything matters and you should sweat the small stuff. I think Starbucks has the best restrooms in the world. We paid attention to that.

The other is never underestimate getting the brand positioning right inside your company first so everyone understands what the values are and what it means. It’s not about reciting a mission statement, it’s about understanding what is Nike and what’s not Nike. You would hear that all the time in the halls of Nike. There was no mission statement. It all came down to what was honest and what was not honest. What was consistent and what was not consistent. It was highly judgmental, but everyone felt the scrutiny of their peers to honor the brand. So make sure everyone gets it and honors it. And the ones that don’t, you get them the heck out of the company.

Reece: What is the most important element to focus on when building a brand?

Bedbury: Exceeding customer expectations. We are coming off three decades of businesses in every industry failing to meet customer expectations. The sad part is they have done that while communicating promises they are not keeping, or inconsistently meeting. People just want a product they can trust. Less than 10 percent of product claims are believed today.

Reece: How does a company understand its brand essence, what you call its DNA?

Bedbury: It starts with an audit. If you ask employees to use three adjectives to describe the brand today, good or bad, what would they say?

The second question in this two-question survey is, “If everyone in the company did their job at the highest level and pulled together, how would you want the brand to be described as in three years?” There is always a gap.

Copyright, American City Business Journal. Reprinted by permission.

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