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Un-Stalling CSR with the Value Creation Framework | Part 1/2

A few days ago a Forbes blog entitled Why has Corporate Social Responsibility stalled? did the rounds.  It’s an interesting read and I’m not out to criticise.  However it did bring to mind some research from a few years ago.

Back in 2008, before Lehman Brothers fell flat on its face, the European Academy of Business in Society (EABIS) launched a project entitled Measuring the financial and non-financial performance of the firm.

This took the form of an extensive dialogue between businesses, academics, regulators and investors with the objective of exploring the link between ESG performance and a company’s financial success.

You can see some of the headline conclusions on the Investor Value website and download the full report Sustainable Value (PDF) from the same website.

A major part of the report is the Value Creation Framework, produced by researchers from University Bocconi.  They described it as CSR .. The ‘C’ stands for Complex.  Looking at the Value Creation Framework model above, you can understand why!

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The Evolution of the Coca-Cola Brand

coca-cola signJust last week, I published an article here on the Corporate Eye blog about leveraging company culture for brand storytelling. A couple of days later, Fast Company published a perfect example of using brand history for storytelling that I want to share with you today.

In its 2-minute and 11-second video, the team at FastCo Studios tells the 128-year history of Coca-Cola using words and images.

It’s not just a great example of brand storytelling, it’s also a great example of visual storytelling through short-form, social content. The video is brief, laser-focused, fun, interesting, and highly shareable.

You can take a look at the video below.

What makes this video work so well? As a brand storytelling device, it includes two ingredients that brand marketers should take note of:

1. The Nostalgia Factor

The video includes some well known stories from the history of the Coca-Cola brand like the 77-day lifespan of New Coke and the iconic “I’d like to buy the world a Coke” commercials. The video is filled with nostalgia that will surely evoke emotional reactions from many viewers.

For those of us who are old enough, did you remember that Kim Carnes and Michael Jackson appeared in Coke commercials? Sure, we remember the Michael Jackson hair-on-fire Pepsi commercial, but how many people remember his Diet Coke commercial?

2. The Trivia Factor

At the same time, the video includes some lesser known facts that make viewers sit back and say, “I didn’t know that!” For example, did you know that the original Coca-Cola recipe, one of the most guarded trade secrets in the world, was originally developed by a pharmacist? Did you know that the pharmacist’s bookkeeper designed the Coca-Cola logo using his own handwriting? Did you know that Coke sales doubled during the 1920s prohibition in the United States? These aren’t boring facts like how many awards the company has won or who its executives are. These facts are actually interesting, and that’s why they work so well in this video.

As brand marketers, we have to step back from the companies behind the brands that we promote and look at the brand story from consumers’ perspectives. What parts of the brand story would actually be interesting to consumers? Effective brand storytelling needs to tell the stories that consumers want to hear, not the stories that the company wants to tell. While these two things could be the same, they are far more often not.

Image: anyjazz65 licensed CC BY-2.0

Visual History of Top Car Brand Logos

mercedesThe most well-known car brands in the world have a lot of brand equity, and in Interbrand’s Top 100 Global Brands of 2013 study, more auto brands (14) made the list than any other category. In fact, 20% of the top 20 global brands according to the 2013 ranking are auto brands: Toyota (10th place), Mercedes-Benz (11th place), BMW (12th place), and Honda (20th place).

Many of these big car brands have logos that are recognized around the world. These logos are not just identifiable, they also hold emotional value to consumers. These logos represent a promise that the brand will deliver on its expectations in every customer interaction. The brand reputations might not always be stellar, but the logos have become tangible company assets that deserve a dollar value attached to them. After all, even the most hated brands have logos with value.

I’ll leave a conversation about calculating brand equity for another day. Today, let’s think about how these logos evolved to become not only iconic symbols and assets for their respective companies but also elements of social culture, particularly for brand logos that have been licensed for use on a wide variety of merchandise like clothes, luggage, and more.

A new infographic from Woodstock Motors (shown below) looks at the history of some of the big car brands and their logos. Some of the stories are steeped in the legacy of the people behind the companies, but my favorite story is the one that explains how the Volkswagen logo was developed. The iconic VW logo was originally designed as part of an office contest in 1938 by an employee named Franz Xavier Reimspiess.

I’m an advocate of simple logo design (if it doesn’t look as good in one color as it does in full color, then you should go back to the drawing board), so I love these types of stories about simple logo design that are rich in company and brand history rather than designs based on mathematical equations and complicated geometry, which cost hundreds of thousands of dollars (or more) and take years to develop.

Of course, all of the logos for the big car brands are simple, but you’ll see by reading the stories in the infographic below that some designs try to convey a lot more than others. In fact, there appear to be two extremes—highly detailed logos that are weighed down in “meaning” which actually doesn’t matter much to consumers at all or clean and simple logos. Take a look at the designs and think about how your brand identity compares. Is it bogged down in detail or agile enough for effective application in any platform or experience today and in the future?

car logos infographic

Image: John Karakatsanis

LinkedIn Launches SlideShare Content Ads and Brands Take Notice

linkedinWhen LinkedIn bought SlideShare last year, the marketing world was ignited by the possibilities the most popular social networking site and the most popular professional presentation sharing site could do together.

Many people speculated about what the acquisition would bring to LinkedIn Members. Would LinkedIn Members be able to do more with their SlideShare presentations then simply including links to them from their LinkedIn Profiles (a feature that was possible using the SlideShare add-on within LinkedIn long before the 2012 acquisition)?

This week, brand marketers took notice again when LinkedIn launched SlideShare Content Ads — the perfect blend for business-to-business brands.

SlideShare Content Ads are a part of LinkedIn’s Content Ads program which already includes ways for companies to deliver “content-rich experiences” to LinkedIn members through videos, blog posts, company news, and updates. With the launch of SlideShare Content Ads, brands will be able to target LinkedIn members and display their SlideShare presentations to those members alongside of their regular activity streams.

With a single mouse click, a member can view the entire SlideShare presentation in a pop-up without having to leave LinkedIn. A link will be included in the presentation to visit the company’s website, or the member can simply close the presentation, which brings them back to the activity they were doing before they clicked on the SlideShare Content Ad.

B-to-B brands are likely to jump at the opportunity to test SlideShare Content Ads, particularly because LinkedIn offers excellent targeting capabilities based on members’ profiles. For example, AdWeek reports that advertisers can target people based on their job titles, companies they work for, seniority, company size, and more. Furthermore, performance metrics will include, “an aggregate of non-personally identifiable profile and demographic data of members who see a campaign, including things like job function, industry, and seniority of those that view and click.” Of course, advertisers will also receive traditional digital advertising metrics such as views, average time on presentations, average time spent per slide, and so on.

According to a LinkedIn blog post, the company, “is testing more features that give brands the ability to collect leads directly from SlideShare content, and extend their reach through social gestures including ‘Likes’ and ‘Shares.'” Additional capabilities like those will surely please brand marketers.

Overall, SlideShare Content Ads are a great fit for LinkedIn, LinkedIn members, and advertisers. Getting useful content from a reliable source in front of decision makers when they need it is critical for B-to-B marketers. SlideShare Content Ads on LinkedIn, give brands an excellent opportunity to do exactly that.

The trick will be testing SlideShare Content Ads to identify the types of presentations–from design to length, content, and everything in between–that drive the best results. In other words, many companies follow the strategy of publishing every presentation they have on SlideShare, but not every presentation will be effective as a SlideShare Content Ad. Success will require experimentation, close tracking, and a shift in content marketing and advertising strategy.

Image: Nan Palmero

Using Simple Math to Inform Your Disclosure Policy

making it clearOne of the main channels of communications between corporations and investors are sell side analysts.  They are useful in any number of ways, including as industry experts, creators of detailed financial models of the companies they cover, entry points to very sophisticated sales forces and as the ones who have a recommendation on your company’s stock. However, how they spend their time is often misunderstood.

Based on personal experience, the perception among corporate executives is that analysts spend their time in front of their computers doing research and constructing earnings models, interspersed with an occasional phone call and the odd trip to visit company management. Yet this is well off the mark, and its implications can have a serious effect on a company’s approach to investor relations.

I’m not aware of any academic research considering the relations between sell side analysts and corporate investor relations departments, so I am going to confine myself to a few simple calculations in order to make my points.

The first thing to consider is the number 50%. That is the percentage of time sell side analysts tell me they spend on marketing to the buy side, the investment shops that actually buy, sell and hold securities. So if your average workaholic sell side analyst is putting in 60 hours a week at their job, that means at most 50% of their time, or 30 hours, can be devoted to research on companies they follow. Consider next that the average sell side analyst covers between 10 – 15 companies. If we give the sell side the benefit of the doubt and say they cover 10 companies, that means on an average week they have 3 hours to devote to any single company. And that does not allow for any work the analyst may do on industry wide analysis and deals the investment banking department may want input on. What this means for investor relations is that sell side analysts are very time stressed.

Many companies take the position that the job of an analyst is to analyze and the company should not have to spoon feed them information about the company and the industry. In an ideal world this would be true, but the reality is that the easier you make it for the analyst to get good information, the more likely their analysis is to be accurate. This is because they often don’t have time to go out and get good information on their own.  If on average an analyst has three hours a week to produce quarterly notes, chase down buy side requests for information and talk to company management, it doesn’t leave a lot of time for incisive research and writing.

From an investor relations policy standpoint, this means that companies should think about establishing baseline disclosures, beyond what is mandated by regulation, that can help analysts understand the company and the trends it faces. By getting the basics out of the way, this will allow time strapped analysts to focus on what’s important and they have a better chance of getting it right. It’s one of those rare instances where by helping someone else out, you can also help yourself.

More on Marketing, Corporate Life Cycles and Investor Relations

Previously, I wrote about the commonality between the product life cycle chart and corporate life cycles and some of the implications this has for investor relations.

To recap, where you are in terms of your corporate life cycle is a large determinant in whether you get Growth, Growth at a Reasonable Price (GARP), Value or Deep Value investors. As each of these different styles of investors is willing to pay differing amounts for your future earnings, the valuation you get in the stock market will in no small degree be influenced by where investors view you in your life cycle. To carry this one step further, we will now use the graph to look at how companies seek to avoid the point at which they transition into a mature, and then a declining company and how successful this is in avoiding a declining P/E ratio.

In product development, when a product threatens to become mature, the marketing people move in and try to rejuvenate and refresh the brand by introducing new product features and formulations or market applications. The idea is to boost sales volume and market penetration. Nobody wants to get to the point where a product is mature, verging on stale, and headed for inevitable decline. In graphical terms, what they do looks like this:

Companies do the same thing.  A great example of a company continually reinventing itself via new products and markets is Apple. First Apple was a computer company. Then they introduced the iPod and iTunes. This was followed by the iPhone, Apps and the iPad. Apple has been incredibly successful in this approach—helped by great design and engineering—creating a tightly integrated suite of products that customers love.  And the stock market has richly rewarded them for this, making Apple one of the most valuable companies on the planet.

In addition to new products, companies attempt to prolong their progress up the growth curve through acquisitions, entering new markets, entering new territories, going global, reengineering their work processes, expense initiatives and a raft of other things too numerous to mention. In doing this they hope to extend their growth and the premium investors will pay for their future earnings.  The problem with all of this, from an investor’s viewpoint, is that the new products, programs and initiatives are exactly that, new, and they don’t have a track record. Therefore, the certainty with which future earnings from these programs can be predicted is less than it is for existing operations and the willingness of investors to pay up for the incremental earnings is less.  Unless and until a company can establish a track record for successful entry into new products or markets or initiatives, investors will discount the future earnings at a greater rate than the old familiar type of earnings. Investors just don’t like uncertainty. So revenues may go up; earnings may in fact also go up, but P/Es will fall until a company can demonstrate that it has as one of its core competencies the ability to extend its growth with new initiatives. There is a zone of uncertainty that surrounds the new initiative until things resolve themselves, which graphically looks like this:

Again, if we look at Apple, the first iPod was introduced on October 23, 2001.  Following the announcement of the new product, one that turned out to be revolutionary, Apple’s stock price didn’t do much for the next couple of years. Investors had a wait and see attitude.

This, of course, drives corporate management nuts. They have invested millions of dollars in a new initiative through design and engineering, consulting fees and countless meetings and studies. They are embarking on a bold new strategy to push their company forward for the next millennium. And yet, in their view, the market doesn’t get it. Usually, if you get them off in a quiet room with a scotch or two in them, they will blame this on “Typical Wall Street short-sightedness”.  Yet in this case, investors are really taking a longer term view as they want future uncertainties to be resolved before buying the stock.

Investor relations professionals should learn to recognize this type of fact pattern and be ready to explain to management why the stock didn’t jump when the CEO’s latest initiative was announced. Much heartburn can be avoided if companies take a realistic approach to how the market values new corporate actions. There is no real way around this – companies have to prove themselves to investors on new initiatives to a far greater extent than for existing operations. But as witnessed by Apple, it can be done.