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Growth is rarely easy. Based on conversations with senior business leaders across industries, we sense an increasing recognition that it has never been more difficult to generate and sustain growth. To be clear, we are talking about growth driven by customer interest and market demand, rather than the temporary variety driven by acquisition, cost takeout or organizational restructuring. The bottom line is that not even top performers can expect that continuing to do what got them to market-leading positions will deliver the next phase of growth.  

Some of the common barriers – continuous cycles of tech-driven disruption, relentlessly fickle customers, talent mismatches – are well understood. However, less tangible and often overlooked factors – including lack of C-level clarity and confidence, short-term thinking and a history of unactioned strategies and plans – may be even more hostile to growth. Consider how senior leaders may lose faith in growth strategies when market opportunities shift more rapidly than the organization can pivot, refine its go-to-market approach or reallocate resources. Even when the right strategy is in place, limited ability to execute – or execute at the pace which growth now demands – may undercut returns.  

Because markets move faster than ever, we believe sustainable growth results from: 

• Unlocking compelling customer insights to inform growth strategies 
• Creating relevant, impactful growth moves 
• Executing faster and more efficiently

How Rapid Changes in Customer Behaviors Impact Growth

The customer often has the answer. In today’s volatile markets, growth comes either through a proactive insight-led and customer-back approach, which is more sustainable, or by riding the wave of macroeconomic or societal trends. Unilever proactively changed its portfolio strategy after scoping the impact of the weight-loss drug Ozempic on consumer behavior. Modeling the likely changes in eating habits, Unilever chose to spin off most of its ice cream business, retaining only a few key brands (e.g., Ben & Jerry’s, Magnum).  

During the pandemic, companies like Peloton and Calm realized unprecedented growth as consumers re-evaluated their health and wellness priorities. Both companies have failed to make strategic, post-pandemic pivots to stay relevant.  

For firms that don’t want to leave growth to chance or market timing, success starts with deep insights into customer needs, as Prophet research shows.  

Insights From Prophet Research   

Among innovative companies, 84% have a consumer and market insights capability. 

Among all companies, 37% of leaders say senior executives pay too little attention to customer needs. 

In devising growth strategies, firms should factor in the impact of external macro trends on customers and the opportunities to provide new products and services to help customers navigate them. Even more broadly, executives should reflect on how these changes may influence who their customers are today and who they should be tomorrow.  

Charting the right course forward requires thoughtful decisions across key growth drivers that go beyond customer insight. In other words, firms must ensure that their good ideas are converted from slideware to clear action plans supported by necessary capabilities. Among the questions to address:  

• Who is our target customer?  
• What products, services and experiences should we offer?  
• Why should customers care about our products, brand and purpose?  
• How do they perceive the value we offer? 
• Where and when should we engage customers – via which channels, ecosystems, platforms and partnerships?  
• How will we capture value?  
• What is the optimal operating model to deliver? 

The answers to these questions have short- and long-term implications. The resulting commitments will be ones the organization can sustain for years at a time. They will also determine what firms should do next quarter. Ideally, a clear customer vision will inspire the organization for the future while attentive, dynamic management of action plans will help firms keep up with constantly shifting customer needs and preferences. Firms should plan for frequent refinements and calibrations based on continuous learning about customer behavior, market feedback and competitors’ actions. Prophet research shows that organizations that meaningfully assess and recalibrate growth plans at least monthly are twice as likely to be successful, resilient innovators. Too many firms still think of growth investments as a matter of annual planning.  

What Happens When It’s All About the Short Term?

Unfortunately, immediate-term pressures – specifically that increasing revenue this quarter is always the top priority – may restrict investment in new offerings and thus narrow future horizons. According to Prophet research, 34% of business leaders say their firms overemphasize short-term results. A similar proportion, 37%, say their organization has no long-term planning process. “You’re constantly in this space of change,” one told us. “Plans are abandoned almost as soon as they are made. There’s no real plan because things just sort of happen.”  

Such reactive postures are no surprise given the pace of disruption. They necessitate that firms build new capabilities even as they are running their growth plays. Those capabilities are often housed in agile, test-and-learn oriented and cross-functional teams, which have proven to be more proficient in delivering against growth objectives. Fully 80% of respondents in our global survey said design-led innovation teams are important, but only 37% said their organizations have such units in place. Developing these capabilities is not easy, of course, but they provide the foundation for self-funding innovation programs and, thus, sustainable growth.   

Insights From Prophet Research   

• 63%: organizations lacking design-led innovation teams 
• 37%: organizations lacking a long-term planning process 
• 2x: organizations that meaningfully assess and recalibrate their innovation moves at least monthly are twice as likely to be successful, resilient innovators 

Pathways to Uncommon Growth  

Strategies aligned to these pathways will manifest differently in varying contexts and sectors and they are not mutually exclusive; some firms will emphasize one, while others will experiment with portfolio approaches that include all three. Boldness and creativity can be different makers for these approaches; the bolder the growth strategy, the more likely firms will differentiate themselves in competitive markets.  

1. Expanding Beyond the Core

In this approach, businesses narrow in on customer needs to enter a new market or customer segment, offering complementary products or services to meet a broader range of customer needs. This approach requires the least risk tolerance and least amount of change within a business. And it’s likely to produce quick wins. For example, through the height of the pandemic, companies developed products and services to reduce transmission and care for the ill. Today, companies are looking beyond point solutions and specific problems to focus on more holistic views of respiratory health. Large pharmaceuticals with separate products in testing, treatment and prevention of upper respiratory infections have reorganized their product portfolios around complete and cohesive solutions offered through retail channels.

2. Venturing Into Adjacent Territories

This approach is about uncovering value in products, services and experiences that are closely related to existing strategies. It requires a moderate risk tolerance and degree of change as it explores efficiencies based on existing strengths and capabilities. When done right, firms find differences from the core business but still share commonalities and avoid channel conflict.  

One financial services company coordinated loan refinancing through third-party aggregators. Realizing it had a unique capability to simplify fragmented lender requirements for consumers, it saw an opportunity to own more of the customer relationship. Prophet helped the company refine its value proposition, create a product roadmap and launch its first pilot into market, all while building the product, technology and marketing teams needed to sustain the effort. As a result, the company remained vital through a volatile inflation and interest rate environment, deploying its direct-to-customer capabilities to launch new services, reach new markets and grow its relevance. 

3. Pursuing Net New Growth From Innovation and Emerging Customer Demands

This is the boldest approach, the one most associated with breakthrough innovations from true disrupters. It involves playing in novel markets or industries, creating forward-looking solutions that get ahead of emerging preferences and aspirations that have yet to fully manifest in mass consumer behaviors.  

Not surprisingly, this mode of growth requires the highest level of risk tolerance, the greatest creativity and most substantial change as it pushes businesses to step out of their comfort zone to pioneer new offerings that anticipate customer needs. Companies often invest in cutting-edge technologies, enter new industries or markets undergoing disruption or create entirely new business models by bringing together an original set of capabilities. 

Durable goods manufacturers – faced with acute supply chain disruptions, a long-term trend towards higher-cost, near-shore manufacturing and mixed results from interventions by smart home technology companies – might reasonably wonder whether they can successfully stand up a services model to future-proof their businesses. Spurred by Tesla, car manufacturers now consider the automobile as an updateable software platform, requiring the application of digital integration, user experience and technology expertise throughout design and production processes; they then sell subscriptions to unlock services like OnStar and Apple CarPlay. Appliance manufacturers like Samsung continue to grapple with the elusive promise of Internet-connected screens on refrigerators, washing machines and other home appliances. And manufacturers of entry and exit points, like doors and windows, can seriously consider their products’ roles in connected, smart security services. 

Five Key Capabilities for Unleashing Growth

Once firms identify the right path to growth as outlined above, they must determine the best way to advance quickly, efficiently and purposefully. Too often, this step turns into a stumbling block. However, organizations that possess a few key capabilities and cultural attributes can create the capacity and build the organizational muscle memory to launch new products, devise new business models and execute other types of growth strategies repeatably. They’ll also enhance their ability to operate these new businesses efficiently and scalably. The keys to success are:  

1. Using Cross-Functional GTM Teams to Achieve Speed to Market

When growth is everybody’s job, it may become nobody’s job. On the other hand, growth is too important to be left to small innovation labs or single functions (e.g., marketing, sales, product development). Rather, firms should build cross-functional teams charged with launching new products quickly. Even if the team is small, it should pull from finance, HR, technology, design, strategy and other parts of the organization. Why? Because all of those domains make important contributions to the development of new offerings.   

2. Building a Coalition of Stakeholders for Informed Decision-Making

To execute successfully, growth leaders must have a clear understanding of the critical path of decisions, identify the necessary data inputs to inform key decisions and maintain a steady pace against clearly defined milestones and gates. However, informed decision-making typically doesn’t happen fast enough, especially in large and complex organizations. Delays are especially likely when decision rights are unclear, contested politically or when a large number of stakeholders must be involved n. Ideally, growth leaders will develop a comprehensive coalition of stakeholders throughout the organization parallel with the work to ensure that everyone is on board with coming changes and understands their role in execution. Such a coalition can help ensure depth and alignment of key capabilities. 

3. Making GTM Innovation BAU (Business as Usual)

Any organization seeking sustainable, customer-led growth must find ways to make the capabilities necessary for organizational reinvention, portfolio refresh and continuous learning part of business as usual. For instance, cross-functional growth teams should work within a well-defined go-to-market process, reflecting the reality that launching, operating and scaling new products and business are not “special projects” but an essential part of ongoing operations.  

4. Moving at the Speed of Growth

Across both growth strategy formulation and go-to-market execution, speed is the name of the game. Some organizations are equipped to strategize and execute at speed, but many struggle. To make these plays work for your organization, you need to increase your organization’s speed to:  

• Customer insight: understanding what they want, which channels they prefer and where they’re likely to go next
• Strategy: converting customer insight into strategic priorities 
• Market: turning strategic ideas into in-market action  
• Impact: accelerating the delivery of real-world results  
• Capability: creating the foundation to scale and sustain higher levels of performance 

Speed matters because organizations can only grow as fast as their ability to adapt.  

5. Getting up to Speed With AI

Faced with the need to go faster, many companies are turning to AI. One media company used AI to track consumer preferences, which led to the creation of a new business model centered on interactive and original content. AI tools are helping CPGs to develop prototypes more rapidly. A hospitality leader has embedded AI in enhanced search experiences to drive discovery and rentals of vacation homes.  

While these applications make sense, leaders should recognize that AI is not a silver bullet to accelerate capability development. Rather, businesses need to understand the targeted ways AI-powered customers interact differently with AI-enabled employees. From that customer-back vantage point, organizations can look to create opportunities to optimize, enhance and reinvent engagement (Be on the lookout for upcoming Prophet research that reveals how consumers really feel about and use AI.)  

One More Thing: Balancing the Risks and Rewards of Growth 

Strategic discussions often emphasize the external barriers preventing firms from realizing the upside.  The risks of growth – and the organizational appetite or tolerance of such risks – is less frequently examined. We believe this is an oversight. Senior leaders must attend to the necessary cultural aspects of unleashing growth, including management mindsets.  

While everyone automatically says they want growth, they won’t necessarily be comfortable with the risks involved in launching new products, deploying resources, modifying operations and all the other necessary steps to achieve meaningful growth. As such, leaders would do well to explore just how “growth tolerant” their firms really are. That’s especially true of today’s dynamic, “high-VUCA.” When firms face high degrees of volatility, uncertainty, complexity and ambiguity, growth demands greater organizational resilience. In other words, senior leaders that help the organization become more flexible, adaptable and agile are laying the foundation for sustainable growth.  

How Prophet Helps

We take a collaborative and human-centered approach to help leaders unlock compelling customer and market insights; create relevant growth moves; and develop the capabilities to execute faster and more efficiently.  

Acknowledgments: Marc Anderson and Griffin Olmstead

Imagine a world where roads hum with electric vehicles (EVs), a vision that is rapidly turning into reality in many parts of the world. The global EV market isn’t just growing; it’s catapulting into a new era of innovation and opportunity. It’s far more than the $1.6 trillion realm of manufacturing EVs, batteries, and charging infrastructure. A more compelling question to ask is, “Which industries stand to benefit from this transition?”  

Simply put: Which industries will be disrupted and who will benefit from this global shift towards EVs to drive business growth?  

In this article, we broaden the aperture to focus on the $9 trillion opportunity (a figure based on Prophet internal modeling) that we estimate will exist across a diverse range of industries that can harness the EV transition as a driver of growth and innovation for years to come.  

The EV Transition has Become a Business Reality 

We’ve applied the shift in consumer behavior towards the transition to EVs and found that there is more than $9 trillion in opportunity if you examine not just the transition itself, but the ripple effect it creates across connected industries. 

Regardless of where one might fall on the political spectrum when it comes to ESG, sustainability, and the transition to the electric economy – consumers’ shift to adopting EVs has moved from being a political debate to a business reality.   

An increasing number of countries have crossed what many are calling the ‘tipping point’ for EV adoption, where EVs account for more than 5% of new car sales – with 23 countries already having reached this milestone. Attempting to estimate the number of EVs on the road in the next few years leads to more unanswered questions, with history showing that once the adoption of technology hits the “tipping point”, growth can quickly become exponential. 

Turn on a sports game or YouTube video, and you can’t help but notice how car companies have increasingly been focusing their advertisements on EV products. Top auto manufacturers have been embracing the enthusiasm for EVs even before they can catch up on production, with 10 EV ads during the last two US Super Bowls alone, and several more EV ads planned for this year’s Super Bowl in 2024. Looking to more digital channels, YouTube ad spending to promote EVs was up 8X over in 2023. 

The Transition to an Electric Future 

The transition to electric vehicles is accelerating despite the many debates about how quickly they will be adopted. The amount of capital being poured into start-ups, infrastructure, and the needed recycling providers has created somewhat of a gold rush beyond solely EV production – with venture capital investment in the space up 50% in 2022 to over $1bn, led by a focus on charging, recycling, and other less flashy but critical components of the EV value chain. Over the last several years, governments around the world have committed huge sums of money to rapidly accelerate the electrification of their economies – with billions of dollars from the recent Inflation Reduction Act in the U.S. allocated to help accelerate EV production and build the needed charging infrastructure.   

2030 Outlook: EVs Reaching 10% of Total Cars on Road?  

Our sustainability team has carefully considered how the global shift to EVs will not just affect the auto industry, but also the myriad of interconnected brands and businesses who should be paying attention to this change as a potential driver of growth.  

Taking even the most conservative estimates, EV sales are predicted to account for over 30% of all global vehicle sales in 2030 – a far more modest estimate than the 50% of new car sales goal set forth by the White House for 2030.  

Simply put, that means roughly 10% of the total cars on the road will be EVs in 2030.  

The predicted large-scale changes in consumer behavior will generate massive ripple effects, forcing companies to decide how to adapt their business models, experience strategies, and value propositions. So how might this shift disrupt the many interconnected industries – Will this mean 10% fewer gas stations are needed? 10% less traditional auto mechanics? Fast casual dining at charging stations versus fast food at gas stations?   

“If 10% of the total cars on the road are EVs, how might this shift disrupt the many interconnected industries that will feel its ripple effects? Will this mean 10% less gas stations needed? 10% less traditional auto mechanics?” 

2030 Outlook: The EV Transition’s Impact on Three Key Groups 

The Ripple Effect of a 10% EV Shift 

Even taking this modest growth estimate, imagine the transformative wave the global shift to EVs will unleash. As we delve into this electric future, we need to answer three pivotal questions: 

1. Who will innovate and produce EVs?
2. Who will provide cutting-edge services for EVs?
3. Where will the EV journey take you – from driving to parking?

This exploration simplifies how to envision the EV future, slicing through the buzz to spotlight real growth opportunities. We highlight a few trailblazing industries in each category, poised to seize the monumental opportunities born from the EV wave. 

Innovators and EV Manufacturers  

This sector, the birthplace of EVs, is hoping to become a $1.6 trillion industry by 2030. This number is comprised of a mix of original equipment manufacturers (OEMs), charging pioneers, and battery innovators. For this group, one of the largest challenges will be rapidly scaling battery production and charging infrastructure to meet soaring demand. This necessity serves as a golden opportunity for growth.  

Key Insights: 

• Unlikely alliances are flourishing in the EV realm. Competitors are uniting, which resonates with consumers who applaud this shared mission for sustainability. This collaborative spirit to achieve a “common goal” is redefining brand relationships for the long haul. 
• The EV industry’s trajectory is highly dependent on governmental support. As political landscapes shift so do opportunities and challenges. Brands in this space must stay agile, ready to pivot with changing policies and funding sources. 

Example 1: Partnering to Build Efficiency Across the Grid 

BMW, Ford, and Honda recently announced a new joint venture called ChargeScape, aimed at creating a single way to connect electric utilities, automakers and EV customers. This collaboration seeks to create a unified platform for efficient energy management, connecting bidirectional EV charging with electric grid operations. If successful, ChargeScape could be a game-changer, exemplifying how partnerships can spark growth and innovation in the EV sector. 

Example 2: Competitors Collaborating to Charge Up America 

A surprising number of global automakers have partnered together to address America’s charging network challenges, namely, the lack of a reliable and expansive charging network. This ambitious joint venture plans to establish over 30,000 chargers across North America, complementing Tesla’s existing network and contributing to the national goal of 500,000 chargers by 2030. This collaboration showcases how competitive brands are aligning their interests for a sustainable future. 

Service Providers for EV 

Beyond manufacturing, we have the many industries that will service EVs, a group of industries ripe with a $2.8 trillion opportunity by 2030. From renewable energy champions to auto-repair and fleet management innovators, these industries are gearing up for an EV-centric future. 

Key Insights: 

• Long-term visionaries are investing boldly. Despite short-term uncertainties in EV adoption forecasts, large firms are strategizing about how to effectively harness the full potential of this transition. 
• Adaptability is key. Companies like Shell and BP have demonstrated that transitioning from traditional revenue streams to embracing the EV shift is not only necessary but a strategic move to remain relevant. 

Example 1: Shell Focuses on a Low-Carbon Future 

Shell is actively steering its brand towards a low-carbon future, aligning its thoughtful approach to building their new purpose with evolving energy market demands. Through comprehensive research and substantial investments between $10-15 billion by 2025, Shell is delving into low-carbon solutions like hydrogen, EV charging, and biofuels. They are already seeing success, with their UK EV-only service station witnessing a 44% utilization increase since 2022. Shell has been investing heavily in the EV transition and its focus on expanding its EV charging network is paying off, as evidenced by EV customers visiting more frequently and spending more. This significant shift reflects Shell’s commitment to leading in the global transition to renewable energy. 

Example 2: Bridgestone Mobility Solutions Launches EV Services Platform 

You might know the name Bridgestone from the globally famous tire brand; however, in recent years the company has expanded its offerings to be focused on mobility and solutions. As part of this transformation, Bridgestone recently announced the launch of an EV Services Platform “to make electrification easier, cheaper, and faster for fleets”. This platform is intended to help fleet managers, EV service suppliers, and drivers alike by creating a more efficient EV service ecosystem that helps manage costs and simplifies the process of using EVs as part of a commercial fleet. 

The New Destinations for Your EV 

Lastly, we explore industries less directly impacted by EVs but poised to innovate and capitalize on this shift. This group has the potential to capitalize on the increasing number of EVs and encapsulates a staggering $4.9 trillion opportunity. 

We focus on quick-service restaurants, convenience stores, and smart home providers. These industries are where EVs will likely spend significant time, especially considering the pivotal role of ‘Smart Homes’ in the EV charging ecosystem and the amount of time cars spend parked. The challenge for these businesses is more than installing chargers; it’s about reimagining consumer engagement and evolving business models in the EV era. 

Key Insights: 

• Many brands are enthusiastic about joining the EV movement but lag in aligning their operations with their climate pledges. The real work lies in transforming business models to sync with their environmental commitments. 
• A rich opportunity exists in deeply understanding the EV consumer. Pilot projects and test-and-learn initiatives are underway but grasping the unique nuances of EV consumer behavior – from charging habits to travel and purchase patterns – remains an uncharted territory ripe for exploration. 

Example 1: Fast Food Is Getting in on the Action 

Fast food chains are already beginning to direct their attention to the EV shift in road trip transitions. Subway announced a new pilot, the Subway Oasis, partnering with Gen Z EV Solutions to blueprint what the future of Subway EV charging stations may look like. The Oasis will include Wi-Fi, picnic tables, and green spaces – intending to appeal to the eco-conscious consumer – as well as their EV chargers. While this approach is unique, Subway is not the first company to explore this idea; Taco Bell and Starbucks have begun to pilot their own EV charging solutions, with each brand piloting charging stations at their locations with the intent of seeing how it might drive revenue and customer growth. 

Example 2: Schneider Electric Creates ‘Schneider Home’ App 

The French multinational company, Schneider Electric, recently shared its newest innovation, Schneider Home – an all-in-one smart system with the aim to consolidate the home energy needs of the future. Consisting of solar power, battery backup, EV charging, home automation and connected switches, the ‘Schneider Home’ allows you to visualize your energy use and customize your habits via their app. 

Schneider Electric exemplifies a company that has begun to successfully align its brand purpose, value proposition, and product offerings in the market. With the brand’s purpose of “empowering all to make the most of our energy and resources,” Schneider Electric has moved past articulating a future ambition and is actively expanding the transition to a more sustainable energy future, which includes a push from Schneider into eMobility solutions and the Schneider Home. 

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ESG is not just a feel-good initiative – it is a vital part of business and employee engagement strategies that drive growth in a world that increasingly needs businesses to address pressing global challenges.  

Companies face pressure from multiple stakeholders to be more socially and environmentally responsible while being transparent about that progress. While there is a continued push by consumers and employees, regulators and investors are also pushing harder for ESG. The EU now requires companies to publish reports on the social and environmental risks they face (with the US not too far behind). 

As a result, businesses have begun to invest more seriously in delivering against their ESG ambition and targets – aiming to create a tangible impact. But as the ESG focus strengthens, there is often a gap – between how companies perform on ESG, and what customers perceive of a company’s ESG strategy. 

Evaluating the ESG Gap 

The ESG performance vs. ESG perceptions gap is based on two questions: 1) How well is my company performing on ESG? and 2) How do customers perceive we’re doing on ESG?  

The glaring discrepancy between these two questions has fueled the rise of “greenwashing” or “purpose washing” accusations against some companies, while the reconciliation of this gap has generated growth by leaning into customer preferences. As a result, it’s urgent that companies understand and evaluate their gap to maximize their ESG impact and tap into new opportunities. 

Note: Dots represent industries and companies included in the Prophet analysis.

Figure 1: ESG Performance vs. Perceptions example

ESG Performance 

In addition to companies’ internal reporting, a wave of third-party ESG metrics and ratings (e.g., MSCI, S&P ESG Scores) have emerged. These scores measure how well a company addresses and manages risks in the areas of environmental, social, and governance. As a result, ESG scores should provide an unbiased, comparable view of a company’s ESG exposure to guide investors. 

While these metrics aren’t perfect – they often leverage incomplete data and standard measurement processes have yet to be implemented – they provide much-needed visibility to external stakeholders and comparability across companies and industries. 

ESG Perceptions 

ESG performance scores measure what a company is doing across ESG initiatives – it’s another effort to be recognized and rewarded for that investment by consumers.  

While many factors affect brand perception, companies are starting to integrate customers’ ESG perceptions into their analysis as ESG becomes a purchase influencer. For example, products making ESG-related claims averaged 28% cumulative growth over the past five-year period, versus 20% for products that made no such claims. Companies can look at data (like the Prophet Brand Relevance Index ®) to better understand what consumers think of their brands. 

Using performance scores and customer perceptions of ESG, companies can start to understand if they are successfully communicating how their ESG agenda translates to additional value. Alternatively, these metrics can help companies determine if their words are ahead of their actions and if they are at risk of greenwashing or virtue signaling.  

The Framework 

By identifying the gap, companies can diagnose where they are in their ESG journey and the next steps for progress: Are they slow to adopt ESG and need to integrate it into all functions? Are they perceived by customers to be performing well on ESG but not living up to it? Do they have robust ESG programs but aren’t publicly recognized for them? Or are they ESG leaders? 

To better illustrate the gap, we mapped customer perceptions and ESG performance scores, identifying four quadrants that companies may occupy. We will take a closer look at the automotive and retail industries, both of which have organizations that occupy all quadrants. 

Overall, one theme emerges: Companies need to do better on ESG, both in establishing and executing ESG commitments and initiatives and sharing that progress openly with stakeholders. 

Figure 2: ESG Performance vs Perceptions: Automotive Industry

Figure 3: ESG Performance vs Perceptions: Retail Industry

Leaders (HIGH Performance/HIGH Perceptions) 

What this means: Companies here are both performing well on customer perceptions and ESG performance scores. Some of them have found strong alignment between elements of ESG and their businesses. Others have leveraged an element of their business (a product or a component) to build credibility with consumers around an area of ESG (e.g., using recycled or renewable materials in a new product). Overall, these companies are born out of purpose, intertwining their ESG strategies with business strategies. 

Who we’re seeing in this space: This is an aspirational quadrant not characterized by any one industry. The few inhabitants often represent the best of their category, having typically established ESG precedents for their industries.  

For retail (see figure 3), Adidas, Sephora, Etsy, and Athleta live here. Sephora is known for integrating DE&I thinking not only into its internal culture and employee operations but is also committed to ensuring that its products are sourced from diverse businesses. It was the first retailer to dedicate at least 15% of shelf space to Black-owned brands and commissioned the first-ever large-scale study on Racial Bias in Retail to improve the shopper experience.  

What to do if you’re here: Continue to make sustainable and socially responsible products, services, and investments in ESG. By seeking industry collaboration, companies can bring others along on the journey and strengthen the category. But while it’s great to have established leadership, companies here will need to be vigilant and make their leadership positions defensible. Other companies will see the benefit of being known as strong ESG performers and will strive to replace the current leader. 

At Risk (LOW Performance/HIGH Perceptions) 

What this means: This quadrant is characterized by high customer perceptions of ESG in contrast to low performance on ESG. ESG may be well integrated into the brand story through messaging, but there hasn’t been strong progress in delivering on that narrative.  

Some are purpose-native companies that made ESG a core part of their brands, benefitting from the halo effect from their origin story, despite being unable to enact a robust ESG strategy as they scale. Other companies include strong consumer brands with ESG-friendly elements, but company performance on ESG doesn’t match.  

As a result, companies here are at risk of being labeled as “greenwashing” or “virtue signaling” if customers realize the company’s ESG initiatives amount to statements with little evidence to back them. 

Who we’re seeing in this space: Some companies may be unable to scale their ESG performance to align with their words. For example, Tesla (see figure 2), nearly synonymous with EVs as the pioneer in the space, was born out of the purpose to accelerate the world’s transition to sustainable, clean energy. However, despite this clear mission, the company has struggled to make strides in other facets of ESG – Tesla was removed from the S&P 500 ESG Index because of issues of racial discrimination within its workplace. Its CEO is famously outspoken for his anti-ESG rhetoric. 

What to do if you’re here: Assess where to improve or build strategies to deliver on ESG promises and customer expectations. Commit to bold moves against top risks to show progress and authenticity.  

To avoid widening the gap, companies should evaluate the validity of any explicit ESG claims in their messaging to ensure that they are staying true to their statements. ESG performance should be prioritized over ESG perception building. 

Invisible Innovators (HIGH Performance/LOW Perceptions) 

What this means: Companies here are performing well on ESG but aren’t recognized for their progress by consumers. This could stem from 1) not communicating ESG strategies to external stakeholders, 2) not coordinating ESG excellence with brand and marketing, or 3) believing that their customers might not prioritize ESG when they search for and purchase products. Some companies, like a QSR or CPG food company, might even be plagued by category stigma developed over years of a tarnished reputation. 

We also see more consumer awareness of social and environmental efforts in lifestyle, fashion and entertainment categories – consumer-facing brands that play prevalent roles in culture and identity – rather than functional brands in the appliance and food categories. ESG expectations will also vary by the category of the issue. For example, some customers may think a transportation company should prioritize environmental issues over social issues.  

In figure 1, we see a relationship between low ESG performance scores and low ESG data availability – illustrating that without robust data sets for third-party ratings, companies’ ESG scores will ultimately be hurt.  

Who we’re seeing in this space: When we look at the rest of the automotive industry (see figure 2), there is an intriguing contrast with Tesla. There is a cluster of auto companies including Volkswagen, Mazda and BMW that have higher ESG performance scores but lower customer perceptions of ESG. This illustrates the necessity of not only delivering on ESG ambitions but communicating them well.  

For example, BMW established clear goals such as reducing CO2 emissions by over 40% by 2030 and meeting climate neutrality no later than 2050. Additionally, the company aims to have 10 million fully electric vehicles on the roads by 2030, with all vehicles able to be fully recovered and reused for circularity. However, BMW’s lower customer perception of ESG illustrates that customers don’t know what BMW is doing to leave a positive impact on the environment, potentially leaving environmentally conscious consumers out of reach. 

What to do if you’re here: Companies should build connectivity between their ESG and brand narratives for a cohesive story that touches all stakeholders. They should also start sharing their ESG data more openly to socialize their performance. If their brand is rooted in ESG, then they should follow up with the numbers to support it. 

Companies should increase collaboration between the Chief Marketing Officer and the Chief Sustainability Officer. Shine a bright light on the elements of ESG that consumers care about. If companies don’t know if or what they care about, they need to find out.  

Laggards (LOW Performance/LOW Perceptions) 

What this means: Companies here are underperforming on ESG and are perceived poorly by customers with respect to ESG. This may mean that these companies still see ESG as a siloed function (like Corporate Social Responsibility) in the business. Companies here may also be in an industry where no player is focused on delivering against ESG. Or the company is lagging, relative to its more ESG-progressive peers.  

As a result, there is ample opportunity to establish a strong foundation for growth in all areas of ESG. 

Who we’re seeing in this space: Typically, larger, legacy companies – especially those whose businesses seem foundationally at odds with ESG – may run into these ESG challenges because they are slower to adapt. For example, the apparel and fashion industry (see figure 3) – which is responsible for 10% of human-caused greenhouse gas emissions and 20% of global wastewater – is now scrambling to reduce its environmental impact against the backdrop of the harsh effects of climate change.  

Macy’s is one of the country’s most storied department stores, founded over 150 years ago. As the store looks to set itself up to rectify years of flagging sales, it has turned to ESG to fuel its future. In 2022, Macy’s announced that it will spend $5 billion by 2025 on three pillars of social purpose – people, communities, and the planet – to help shape a more equitable and sustainable future. Legacy companies like this are now realizing that success in the future is tied to meeting the needs of customers and employees, who want the organizations they purchase from and work for to be socially responsible. 

What to do if you’re here: Look for quick wins to establish a foundation for ESG. Try to move performance first, but also evaluate the need to shift perceptions. Start sharing ESG data more openly to socialize ESG performance with stakeholders, emphasizing a commitment to accountability. 

Set an ESG ambition and agenda to identify the next steps to start delivering on their goals. A transformation plan can help outline how a company must change for this new chapter of growth. Additionally, join industry or issue-based coalitions to build understanding, commitments, and relationships. 

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METHODOLOGY

ESG PERFORMANCE SCORES: In our analysis, we used 2022 S&P ESG scores to identify companies’ performance on ESG. Unlike ESG datasets that rely simply on publicly available information, S&P Global ESG Scores are informed by a combination of verified company disclosures, media and stakeholder analysis, and in-depth company engagement via the S&P Global Corporate Sustainability Assessment (CSA).  

CUSTOMER PERCEPTIONS OF ESG: To determine customer perceptions of companies’ ESG performance, we leveraged our 2022 Prophet Brand Relevance Index ® (BRI) data. The BRI measures brand relevance – relevance encompasses all the elements required for a strong brand and healthy bottom line, including high demand, strong appeal and products and services that add value to a consumer’s life. 

Prophet asked more than 13,500 consumers in the U.S. about the brands that matter most in their lives today. We measure their relationship to 293 brands in 27 categories, looking closely at 16 attributes. 

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The last few years have proven that disruption is the only “normal” in business. The world is still slogging through seismic plot twists of the previous few years, making inflation, supply chains, Ukraine and hybrid workplaces a critical topic on virtually every corporate agenda.   

While most forecasts call for nothing but grey skies, we disagree. History shows that periods of economic uncertainty heighten innovation and lead to new products, services and business models. After all, companies like General Motors, Microsoft and Electronic Arts formed during recessionary times.  

In 2023 we expect to see new ideas and products emerge from the rubble of disruption we’ve experienced on a global scale. But to get there, c-suite leaders will need to rethink how they lead their organizations.   

We expect the most successful c-suite leaders to lean into these six key leadership trends in the coming year.  

1. Productivity Improvements Will be a Critical Path to Profitability   

Over the last few years, a handful of digitally native organizations have chosen growth over profitability and had ample investors who were happy to take risks on future opportunities.    

Rising interest rates have ended that party. And as a result, investors are pressuring companies to continue to grow and make money or at least commit to concrete paths to profitability.   

Throughout the second half of 2022, many organizations abruptly shifted their focus from growth at all costs, even if that meant risking profitability, to achieving profitability by cost-cutting measures. 

 And while some companies may need to lean into cost-cutting efforts in 2023, more c-suite leaders will look to enhancing productivity within their workforce to achieve sustainable growth and profitability. For these leaders, the productivity improvements will come from technology, data and analytics.  

2. Balancing Short-Term and Future-Back Planning to Drive Sustainable Growth  

Long-term planning will always be a core component of business strategy. But the upheaval of the last few years has made it painfully clear that companies need to speed up the journey from thinking to doing. And that means integrating quick wins with future vision, so that the results you drive today do not hinder your long-term progress. 

Take, for example, Disney’s recent decision to increase prices for park admissions, annual passes and vacation clubs. This decision infuriated loyal Disney fans, who accused the company of price gouging. While the company may have achieved a quick win from this plan, the long-term effects of the decision may slow Disney’s progress toward its vision.  

In 2023, c-suite leaders will need to carefully balance short-term and future-back planning:  

• Short-term planning: This type of planning requires leaders to think and make at the same time. Risks are reduced with small bets to show progress quickly. Using data and behavioral insights, companies can identify things they know, which they can execute now. They can also explore what they think they know with new and near-term concepts. And those efforts will inform what they think, allowing them to hypothesize, and validate along the way.
• Future-back planning: This approach is about creating predictive models of the future, nine years or more out, to model the probable and preferable future. Which levers should a company pull to get there? Might they do better to build, buy or partner? It considers complex elements, such as politics and socioeconomic shifts, so leaders can confidently see where the business fits in the future and the immediate steps they need to take to get there.    

C-suite leaders who successfully lean into this leadership trend will be well-positioned to achieve immediate wins while also investing in the future of their organizations.   

3. Purposeful Data-Driven Decision-Making Will Reduce Risks   

Data-driven decision-making is critical to increasing confidence and reducing risks. And while that’s been true for decades, more and more companies realize they may have too much historical data and need more predictive data to better inform their decisions. As a result, many executives are making different demands of their AI and analytics teams, aiming to sharpen their business strategy.   

But being data-driven in your decision-making is only one part of the equation. During times of uncertainty, it’s essential to be purposeful in utilizing data to inform your decision-making.   

Amazon has long aced this approach, using analytics to evaluate whether a decision is a one-way-door or a two-way-door.    

Two-way-door decisions are safer and relatively easy decisions to reverse. For example, if the pricing strategy for a new service is hindering performance, it is possible to right-size and reposition the offering or pricing strategy.    

One-way door decisions are more complex, nearly impossible to undo, and require rigorous scrutiny. For instance, a company that misjudges the demand for a product or service has no opportunity to take that decision back. These decisions require rigor and high confidence levels that predictive data modeling can provide.    

In constrained business environments, risky decision-making can be detrimental to the success of your organization, which is why it is more critical than ever to understand the true impact of the decision and be purposeful in how you evaluate the opportunity.   

4. Environmental, Social and Governance (ESG) Regulations Will Require Businesses to Rethink Their Global Approach 

There was a time when everyone building a global business and a global brand thought they could have one approach that would work across different countries: One operating model. One brand positioning. One value proposition. That time is over. Every country has divergent priorities, consumers and governments requiring differentiated business strategies.   

Consider the increase in ESG regulations that have surfaced globally. For example, the European Union (EU) recently passed the Corporate Sustainability Reporting Directive (CSRD). This new directive will soon require large companies that meet specific requirements or are listed on EU-regulated markets to disclose environmental and social metrics across their supply chains. It will also hold these companies legally responsible for their ESG commitments. To meet CSRD targets, large companies doing business in the EU will have to rethink their supply chains and operations and their entire value chain from product and service design to business models and innovation.   

And in the U.S., the Securities and Exchange Commission’s new proposed rule amendments will require domestic and foreign companies to disclose climate-related risks, governance of climate-related risks, greenhouse gas emissions, climate-related financial statement metrics, and information about climate-related targets and goals.  

Global businesses need to ditch their one-size-fits-all approach to international expansion to meet evolving government regulations and consumer preferences. Instead, these companies will need to find new innovative ways to tailor their brands, business strategies and operations to meet the diverse needs of each market. 

5. New Models of Production Will Unlock Sustainability, Efficiency and Customer Intimacy   

The era of mass production may be ending right in front of our eyes. As a result, we’re seeing a new leadership trend emerge from the c-suite: decentralization. Not only is this a solution for the supply chain challenges it is also a more sustainable and efficient way to impact local communities.    

Many leaders also realize that decentralization can get their products into the hands of their customers in a quicker and more sustainable way. Localized production also allows for co-creation with their customers, improving service and a low-cost path to differentiated and more relevant product offerings.   

There are risks, however. Getting decentralization right will require leaders to closely re-examine their operating models, decision rights, and leadership skills. Without leadership setting a solid direction for the organization, leaders risk efficiency without innovation or innovation without efficiency.   

6. Leaders Will Walk a Tight(er) Rope When It Comes to Political Issues   

The purpose-driven gospel of recent years insists that companies take a stand on issues–or risk losing employees and customers. But figuring out how to do so keeps CEOs, CPOs and CMOs up at night.     

BlackRock’s struggles are emblematic of this challenge. Six states (thus far) have yanked billions in investments from the world’s largest money manager, protesting its commitment to environmental and social change.    

Over the last few years, organizations have been called upon to take a stance on hot-topic political issues ranging from healthcare to ESG. But taking a stance (or not) has become more complicated as companies increasingly navigate accusations of being either too woke or not woke enough.    

In the year ahead, leaders will strive to sort out political agendas with three different pathways:    

• Publicly support political issues     
• Stay silent on political issues     
• Show support for political issues within their workforce policies without publicly supporting the cause     

Regardless of where you or your company stand, the decision to engage publicly on political issues needs to consider the full range of potential consequences that might arise. Speaking out quickly might feel good in the first 24 hours, but unintentionally create outcomes that fly in the face of the very values you espouse. 

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Chief marketing officers are looking to the year ahead with caution as the story of the economy plays out through 2023. While growing economic uncertainty means almost nothing will be predictable, it also creates opportunities for leaders to shine by doing more with less and leaning heavily into creativity and innovation. On the one hand, CMOs feel pressured to keep in step. They want to move faster and are looking for ways to add speed and tactical agility. But they’re moving more thoughtfully, too. They want to deepen their connections with people at a time when consumers are more conscious about their spending. Importantly, they feel well equipped “to go into battle” as they can lean back on lessons learned from the beginning of the pandemic. 

While building a strong brand is always critical, it becomes more important during economic downturns. When presented with brand choices, consumers are more likely to stick with brands they know and trust–even when given lower-priced options. So CMOs are questioning which moves will best strengthen trust with their existing customer base while finding ways to resonate with more consumers. 

In the coming year, we expect CMOs to: 

1. Flex Into Expanded Roles 

Their titles haven’t changed, but marketers recognize that their sphere of influence is shifting. The marketing function is no longer just responsible for using marketing to deliver value to the organization. They must prove and demonstrate how while taking on more ownership of the growth agenda. That includes uncovering new pockets of growth and figuring out new audiences and opportunities. 

As board-level expectations rise about marketing’s ability to prove its value, CMOs become integrators. They are bringing together different functions, from sales to product to ESG. This expanded responsibility for growth means moving beyond marketing key performance indicators to commercial KPIs, substantiating their impact on growth.  

And that means marketers must embrace a different language, leaving marketing jargon behind as they translate everything they do into the lexicon of business value. 

2. Refocus on Existing Customers Through Their Post-Purchase Journeys 

In times of economic uncertainty, companies should shore up their customer base, exploring new ways to drive loyalty. In lean times, brands must find ways to build trust and stay top-of-mind. Creating better customer experiences is a sure bet. 

The more companies invest in customer experience, the more they learn how to improve it. That means they’re making sure CX is brand-led, differentiated and personalized. The shift comes from seeing CX less as a defensive exercise and more as a positive relationship builder. It’s a way to expand the brand definition, bringing customers closer to its purpose. It creates more meaningfully engaged communities that act as stores of value during challenging economic times and sources of advocacy when conditions improve. 

Only data can inform that level of intimacy, so CMOs are becoming more outspoken about ineffective corporate data strategies. They’re learning that an overabundance of data often means they can’t thread the needle. And they’re constantly re-evaluating the role analytics play in the marketing organization, aligning marketing technology to produce more meaningful insights. 

It’s not just about having the right data. It’s also about having the right talent and teams in place to support the shifting needs of the business. We expect CMOs to continue to prioritize adding insight and experienced professionals who know how to ask the right questions of data and uncover insights that drive growth. 

3. Hold the Line on Brand Versus Performance Marketing Budgets 

The mix matters. And it requires extra attention in bumpy economies. Many companies are already slipping into fear-based budgeting, tipping into demand marketing at the expense of brand initiatives. It’s easy to do so at a moment when the rest of the C-suite is begging for quick results.  

But it’s also a mistake. And the most effective CMOs will make a case for sticking to the 60/40 rule, even as they find better ways to integrate brand as a growth engine. 

And they’ll increase efforts in key areas: 

1. Experimentation: Under budgetary pressure, it’s tempting to back away from unproven channels. Those that continue to test and learn will see the best long-term growth results versus relying solely on quickly outdated benchmarks. But with the stepped-up scrutiny on budgets, experimentation should be agile. It’s okay to redeploy resources if the tests aren’t delivering results.  
2. Channel Strategy: Social media is changing so fast that it requires teams to constantly refine goals and tactics. As TikTok becomes mainstream, Twitter (and new competition) evolves, YouTube gains clout and the metaverse beckons, brands need to constantly chart new directions. Few brands can–or should–be everywhere. But they all need to know how and why their customers use social.  
3. Reporting: Tracking and socializing results should be done through business outcomes, not marketing metrics. This makes it more possible to connect brand and demand performance. No one in the board room wants to hear about clicks. The point of reporting is to evaluate past performance and make better, more effective strategic decisions for future efforts, getting the most out of limited resources. 

4. Welcome More ESG Moves into the Marketing Tent 

As governments, investors, employees and customers demand more accountability, environmental, social and governance policies are under the microscope–and their weaknesses are showing. Marketers can and should take on more, addressing the many ways ESG issues directly impact brand value. More CMOs are putting sustainability commitments and public announcements on the front of bottles, addressing it in packaging and formulation.  

They’re becoming more aware of how vulnerable brands are to greenwashing claims. That means focusing on the key proof points needed to substantiate ESG efforts.  

But most importantly, CMOs recognize that ESG has become a customer preference and a strong one. People want companies to make less harmful products and to behave responsibly. It’s no longer possible to think that only subsets of consumers care about the planet or labor practices. It’s a trend that will only intensify. 

We’ll see more businesses realize that ESG shouldn’t be thought of as a single set of initiatives. It’s a commitment a company makes, which then translates into many facets of operation and consumer engagement. 

5. Rewrite Their Personal Purpose 

Many CMOs are facing a significant amount of internal and external headwinds which can lead to a sense of frustration by not being able to deliver the impact they’re looking to achieve. While their creative energy and strategic skills may have propelled them to the top job, the harsh challenges of the last few years have sucked much of the fun out of their careers. Bludgeoned by the Great Resignation, skirmishes over hybrid work policies, positions that seem unfillable and looming economic storm clouds, many feel more like survivors than visionaries. They have less freedom to be creative. And motivating teams while managing department-wide burnout takes much more of their time than it once did. 

While the last few years may have presented a number of challenges, there’s ample opportunity to start taking their purpose-branding lessons to heart and redefining their career goals. Expect to see CMOs applying the lessons from tough times to dig deeper for motivation and find new ways to reignite their passion for marketing. Their goal is to transform resilience from a corporate buzzword to a personal mantra. 

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In response to the rising demands of stakeholders, companies are racing to put out sustainability commitments, with 92% of the S&P 500 now publishing these reports.  

It’s an important shift. Companies with established environmental, social, governance structures have integrated ESG thinking into every aspect of their business – increasing transparency, rethinking environmental impact and improving how they treat employees and other stakeholders. Job seekers, particularly the newest entrants to the workforce, will disproportionately want to work for organizations with an established ESG strategy over others. New hires are also more likely to stay if the intensity of the business’ actions matches the commitments. Lastly, ESG matters more to investors, with 85% of investors now mulling a company’s ESG status before buying shares. 

Many companies, though, are struggling to connect their commitments to action. They set ambitious targets–and that’s a good start. But once it comes to integrating ESG across the business, change leaders often don’t know how to navigate the path from ambition to demonstrable impact. It can be hard to build positive business cases for ESG initiatives. This is because there often isn’t a clear operating model for driving durable change and an ESG strategy requires collaboration across all parts of the business.  

We think another major problem is that many companies still see ESG primarily as a compliance and risk mitigation tool, almost exclusively. 

But we recognize it as a bigger opportunity, offering the potential for shared value creation. And there are many reasons to believe that ESG will be the next big driver of growth and transformation in the coming decade.  

As companies use ESG strategies to find more purposeful, inclusive and regenerative business models, they create value in important ways: 

Attract Talent, Boost Retention and Increase Employee Well-Being

It’s hard to overstate how important positive environmental, social and governance practices are to the modern workforce. A recent study from Marsh & McLennan finds a strong correlation between high employee satisfaction and companies with the best ESG scores. These ESG outperformers are also especially attractive to students and young professionals, with 86% of employees preferring to work for companies that care about the same issues they do.  

Improve Customer Acquisition and Retention to Build Brand Strength

People care–and deeply–about how companies contribute to solving key issues in our culture and society today. Consumers and B2B buyers alike want to do business with organizations that are environmentally responsible and fair to employees. They want businesses to stand for something.  

Ipsos reports that 66% of U.S. adults say they prefer to buy brands that reflect their values, up from 50% in 2013. The global average is even higher, at 70% of respondents, with those in emerging markets especially likely to agree. 

Optimize Supply Chains, Drive Efficiencies and Create New Opportunities

While pandemic-era shortages may have vaulted supply-chain concerns to the popular consciousness, they’ve been growing in complexity for some time. They present dizzying ESG challenges, with the average company having 3,000 suppliers for every $1 billion it spends. Supply chains are fraught with risk, with the World Economic Forum estimating they account for about 90% of all emissions and widespread human-rights problems. 

Using ESG principles to optimize and build resilience into supply chains is a huge growth tool, as companies with advanced supplier collaboration and innovation outperformed their peers by 2x in growth. 

Power Innovation and Lead to New Business Models, Products and Services

As companies move through the early phases of ESG–from mitigating risks and achieving efficiencies–they reach the point where the assets and capabilities that power ESG performance can simultaneously become growth tools for competitive strategy and innovation. This requires deeper bridge-building across all parts of the organization. ESG may have first emanated from investor and regulatory pressures, but as it becomes more understood throughout organizations – including product, commercial, and go-to-market leaders. This should open up new pathways to business model innovation, new services and inspire new ways of working.  

Here again, bold and clear goals pay off. In a study of 1,000 companies with climate objectives, those with the most ambitious carbon targets invested the most and made significant operational changes. The result? They also drove the most innovation. 

We clearly see how the principles of sustainable and socially responsible business can unlock opportunities for new products and services. The circular economy offers a $4.5 trillion economic opportunity. New business models focused on reuse, recycle and regenerate are unlocking new opportunities for innovation. Additionally, inclusive design, which embraces a larger view of the human spectrum, has proven to drive innovation that leads to business advantage.  

Moving From Ambition to Impact

Companies must find new and better ways to close the gap between ambition and impact. This requires designing scalable ESG solutions, exploring requirements for change throughout the organization and developing plans that integrate ESG into companywide strategies and operations. 

We’re not suggesting a common path. It’s essential to address what’s material to your industry. For example, water usage and resource availability will be crucial to CPG companies but less to professional services firms. In an analysis of 2,000 U.S. companies, a Harvard Business School study found that companies that consistently addressed material issues in ESG strategies significantly outperformed competitors. Those that paid more attention to immaterial problems, however, significantly underperformed.  

Stakeholders and consumers know when companies are authentically supporting their stances with strategy and when they are greenwashing, rainbow washing and virtue signaling. 70% of Gen-Z and Millennials are skeptical of virtue signaling from organizations, and roughly 80% of companies are just going through the motions and not holding themselves accountable with measurable action, continuing to erode public trust.  

It’s also important to take the ESG maturity of the organization into account. Some have been establishing and finetuning policies and programs for decades, while others are just beginning. 

That said, there are five fundamental shifts common to every organization seeking to sharpen ESG strategies to create new value. 

Companies must move from… 

Embarking on Your ESG Journey

Moving from ambition to action is a complex journey. Targets fluctuate as external factors and pressures increase. And as test-and-learn efforts enrich the company’s knowledge, they become agile and confident enough to take on new endeavors. 

To drive meaningful change, leaders need to evangelize the ESG mindset. Acting on these new tenets of sustainable and responsible business, they need to build coalitions, think creatively, iterate continuously and take risks. It’s a unique skill set but essential if ESG is to come to life throughout the company.  

We’ve found meaningful analogies to these shifts in digital transformation. We’ve helped dozens of companies take the role of digital executives from a single department to an enterprise-wide commitment. Digital thinking now forms the backbone of a modern company’s culture, operations, go-to-market strategies and business models. In many ways, chief sustainability officers are already traveling the same path. They’re driving the ESG mindset and bringing it to life throughout the company.  

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The CEO of a large financial-services organization recognized that their customers were defecting to fintech disruptors, ranging from SoFi to Acorns to Robinhood. The customer base was shrinking and revenue growth was stagnant. But while everyone constantly talked about customer-centricity, the executive team didn’t realize how unfocused they had become. This became clear when they couldn’t explain why some customers were leaving and which customers should be their future source of growth.

“How can we find our way back to growth when we don’t even know who our customer is,” the CEO asked.

The company realized it needed to undergo a transformation.

Most Companies Aren’t as Consumer-Centric as They Think

The pressure for reinvention feels more urgent than ever as organizations look to find their way past the turbulence of the pandemic. Customer behavior has shifted radically and with it, so have customer expectations. Markets are resizing. Supply chains are disrupted. Digital commerce is growing rapidly. Customer experiences are the new product.

Despite these changes, companies, theoretically, are 100% committed to customer-centricity. Unfortunately, all that noise has caused many to relax their true commitment to customers — even if they can’t quite see it. (Of course, some have never been customer-centric, despite years of lip service.)

In our transformation work, we’ve come to understand the root of this lack of focus. Companies missing customer-centricity often struggle with at least some of these internal barriers:

Failing To Connect the Dots

Customer-centricity requires a deep and connected view of the customer, supporting real-time, integrated customer insights. This constantly refreshed stream of data is a tool that all functions should use, and should be buttressed by meaningful, qualitative research including deep listening and active interrogation. The data helps spot the critical shifts in customer behaviors. Tools like ethnography are critical to getting at the why behind the trends in the data. Both ingredients are critical to customer-centric growth.

“Customer-centricity requires a deep and connected view of the customer, supporting real-time, integrated customer insights.”

Too often, companies invest in one-off research studies without thinking through how the insights can be operationalized, distributed, and refreshed over time. Or, they over-rely on data collection as the sole source of customer truth without delving into the why behind the behaviors they are seeing. Without the combination of data and insights, companies can easily lose their way.

Finally, different business units typically “own” these insights, which means they aren’t shared or connected across the organization. The result is that sales, marketing, product and service teams each see a different side of the customer, and no one is connecting the dots or able to see the bigger picture.

True customer-centricity flows from an ongoing and distributed source of new insights — this includes a combination of survey and perceptual data along with database and behavioral insights. Staying on top of what consumers want today and in the future will be crucial to identify the right products, services and experiences that lend themselves towards new opportunities for growth.

Unwillingness To Put Yourself Out of Business

Companies that pay lip service to customer-centricity build products and experiences to fit existing capabilities or business models and then optimize margins based on testing. They think about what they want and what’s good for their margins. They look at existing resources and say, “What can we build with what we have?”

Customer-centric organizations approach innovation and experience design differently. They are unencumbered by how things are done now. Instead, think about how to best meet customer needs today and in the future.

This is inherently risky. Nike’s 2017 decision to sell directly with consumers meant ditching large wholesale customers. To some, that seemed reckless.  Within a year of adopting a direct-to-consumer model, their revenue grew by nearly 6%, and Nike continues to be one of the world’s most fast-moving, beloved brands.

Fear of Going All-in

Companies that aren’t all-in on customer-centricity might think that engagement is a metric only the marketing team needs to focus on, or that managing Net Promoter Scores is a role for the servicing department. They may be willing to overhaul some areas or happy to tweak the existing business model. But complete reinvention? That’s often off the table.

However, there is no such thing as a partial transformation. Genuinely customer-centric organizations know that to accelerate growth, it takes alignment through the entire company. Whether in sales or HR, supply chain or R&D, these organizations set shared transformation goals around the relationships they seek to create with their customers, and they hold everyone to account. Hiring, compensation and operating models are linked to these customer relationship goals in ways that reinforce the right behaviors and business decisions.

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If you’ve listened to global news channels these past few days, you’ve likely heard the word “unprecedented” more than you can count. In Asia, we’ve been hearing similar language for over eight weeks as the COVID-19 outbreak took shape in our region. I fully realize that everyone’s personal and professional situations are unique, but I hope that there might be a nugget or two from my experience that will be helpful as people around the world begin to navigate this unprecedented crisis for the first time.

Here’s some advice for navigating COVID-19:

Stay connected

One of the most important things about working is the opportunity to build personal connections with like-minded individuals. Never underestimate the importance of the small casual interactions that happen in the office every day. It is not easy to fully replicate the in-person experience while working remotely; however, there are several tools and resources – Zoom, WeChat, Whatsapp—that can help you stay connected. Do not only use these tools to carry out “business as usual,” use video capabilities to check in with your colleagues on a personal level. This situation is new for everyone and everyone’s personal situation is different, so a quick call to ask, “How are you doing today?” goes a long way in someone’s day. In the end, we will get through this situation better together than on our own.

Be flexible

Flexibility is obviously very relevant for us as individuals as we learn how to adapt to a remote working environment, but it is even more important in the context of working together. Understanding that everyone’s situation is a little bit different and showing a willingness to flex your own schedule to accommodate your colleagues and clients will make it easier for everyone on your team to survive, and even thrive, in this new normal situation.

“We will get through this situation better together than on our own.”

Lean into the unfamiliar 

Every day you will be faced with new challenges about how to conduct your work while needing to be physically separate. Our teams at Prophet have been able to conduct virtual whiteboarding sessions and hold fun and interactive weekly all-hands meetings and social experiences. All of this came from the team’s willingness to embrace the unfamiliar and apply our best creative thinking to designing a new way forward.

Add your home duties to your schedule 

When we are at work, we are all controlled by our meetings calendar. At home, you will need to balance multiple demands – whether it be your children at home from school closings and roommates working in close quarters. Schools in Hong Kong have been closed since the last week of January and all of us with kids have needed to juggle new home-schooling duties alongside our regular work. In my family, I was responsible for the home-schooling duties of our 6-year-old son. What worked best for me was scheduling time for my “second job” into my day. Every day from 3-5:30 p.m. I would pause my work to teach Reading, Writing and Math. Did that mean that some of my work was pushed into the evening? Yes. Did this experience bring me even closer to my son? Definitely! Do I have a newfound appreciation for Grade 1 teachers? ABSOLUTELY!

Take time to recharge yourself

There is no denying that what we are all experiencing is stressful so don’t forget to take care of your own well-being. You may even find it helpful to add some time to take care of your personal health during the day, especially if you are trying to work from home while your kids are off from school.

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Adopting the Brand-Building Model to Win

Brand building in China is at a crossroads. The long-term, equity-building playbook that once worked for Western companies is now less effective, as China’s increasingly tech-savvy and bargain-hungry consumers navigate a digital ecosystem that’s unlike any other. And the approach many local companies use – trying to quickly increase market share by focusing on speed to market, low prices and broad distribution, usually at the expense of branding – is also faltering.

But there is a new way forward. To help both multinational and local organizations build brand equity and drive growth, Prophet and Alimama developed the new Brand META Model, which stands for the Maintain, Evolve, Transform approach. It is an evolved model for brand building that is adapted for the unique market forces in China.

• Maintain: Maintain the approach of positioning but localize it for different cultures.
• Evolve: Evolve the way data is collected and activated to identify micro-targets of an audience and the planning process so it is more agile and omnichannel.
• Transform: Transform consumer experiences to make them more proactive, experiential and hyper-personalized.

Prophet conducted interviews with more than 40 marketing executives who are thoroughly immersed in the Chinese market. The model blends insight about what makes China unique and finds new ways to develop profitable and lasting customer relationships.

To learn more about the Brand META Model, our collaboration with Alimama and how it applies to your business, contact us today.

Download the full report below.

After years of anticipation, Shanghai Disneyland officially opened to much fanfare and consumer excitement. But, not all are sharing in the enthusiasm. Chairman of Dalian Wanda Group, Wang Jianlin, has made numerous statements about the opening and suggested that the Disney brand is tired or irrelevant to the Chinese consumer.

Wanda has a stake in Shanghai Disneyland’s probability for success as the first of its fifteen planned Wanda City theme parks opened in the southeastern Chinese city of Nanchang.

The fact of the matter is – Disney remains an incredibly strong, iconic global brand for all consumers – including Chinese consumers. The reason Disney’s brand has stayed so strong over the last 100 years, is that Disney has consistently built its brand around “the power of magical experiences.” This idea transcends nationality and hits at who we are as human beings.

Why does Disney pay so much attention to its brand experience?

Disney’s done a great job of localizing the Disneyland brand strategy and increasing its relevance with Chinese consumers. Bob Iger, Chairman of Disney, has dubbed this strategy “Authentically Disney and Distinctively Chinese.” Implementation of this strategy is present throughout Shanghai Disneyland: Main Street USA is Mickey Street and featured are the twelve Pixar-created Chinese Zodiac animals.

The company fundamentally understands what Prophet’s recent research proves: brand experience is a key driver of theme park visits. Having a strong brand is an important factor in consumers’ choice of theme parks, falling behind rides and attractions, as well as being fun and exciting.

“Brand experience is a key driver of theme park visits.”

While attendance figures from the first week show that Shanghai Disneyland is a large draw, the future looks bright as another 61 percent of Chinese consumers indicated they were highly likely to visit Shanghai Disneyland in the next two years.

Add to that figure the 39 percent who said they were somewhat likely to visit in that same time period and you have an overwhelming 100 percent of respondents interested in spending some time (and money) at the resort in the near future.

What do Chinese consumers prefer?

In a media interview, Wang mentioned that Chinese consumers prefer convenient theme park locations saying, “One tiger is no match for a pack of wolves.” His statement implies that having more theme parks located within close proximity to consumers is a better strategy than operating a single flagship theme park.

Our survey found the contrary; Chinese consumers ranked location as the least important factor when choosing to visit a theme park (only 5 percent ranked it number one). Furthermore, aside from the 60 percent of consumers in Shanghai who are highly likely to visit Shanghai Disneyland, many more consumers in more distant cities are also highly likely to visit the resort (53 percent from Beijing, 57 percent from Guangzhou and a whopping 89 percent from Shenzhen). In addition, 53 percent of Chinese consumers said that they would be willing to travel outside their country on a flight of three hours or more to visit a theme park.

Mr. Wang has also reportedly said that Shanghai Disneyland prices are too high – “With such steep [development] costs, Disney would have to charge high prices, which would turn away customers.”

In our research findings, it’s clear that theme park demand is fairly inelastic. Low prices don’t drive consumers to theme parks. In fact, quite the opposite. What parent or grandparent isn’t willing to spend extra money to provide their child/grandchild with a magical experience? Only 8% of consumers said price is the number one reason they choose a theme park (the second-lowest factor). Chinese consumers seem quite willing to open their wallets when it comes to visiting theme parks. On average, Chinese consumers are spending 760 RMB per person per day at a theme park, 40 percent spend more than 800RMB.

Mr. Wang’s most outlandish claim is that Wanda will outlast Disney because his theme parks have longer staying power: “We will make Disney’s China venture unprofitable in the next 10 to 20 years.” Twenty years is the pretty distant future, but we at least know that in the short term, Wanda will likely suffer as a result of Shanghai Disneyland’s opening. In our survey, 48 percent of consumers said they are less likely to visit a Wanda theme park after Shanghai Disneyland opens.

What does this mean for Wanda & other theme parks targeting China?

First, an increase in top-tier, high-quality attractions inside China could signal the rise of domestic destination travel. Almost three-quarters of consumers in our survey say that a trip to Shanghai Disneyland will be an incremental domestic leisure trip, not a replacement of an existing trip. Currently, 77 percent of consumers take one to two domestic leisure trips per year (the average number of domestic trips in China is 1.7 per year), so an increase of just one trip represents a massive new market opportunity.

Second, Shanghai Disneyland will likely stimulate demand for all theme parks and culture/entertainment centers in China, such as Shanghai Dreamcenter. In our survey, 35 percent of Chinese consumers with middle class or affluent incomes said they had been to one or fewer theme parks in the last year. If these same consumers have a positive and memorable brand experience with Shanghai Disney, it means that they are much more likely to visit another theme park as a result.

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After years of leadership in its home market, and being called the “Korean Walmart,” Emart is pushing hard to become recognized as a world-class retailer in its own right. And it’s using strategy-led design to get there. Strategy-led design is the seamless integration of the brand and business strategy with design. This approach is rooted in a deep understanding of the customer, which is built into every facet of design, whether visuals like logos and signage or the experience itself.

Emart’s direction is in keeping with the leadership tradition that has marked the company as South Korea’s first discount retailer since its launch in 1993. Moves like its fresh market grocery, occupying the entire first floor of its typically three-level hypermarkets and being first to adopt an “everyday low prices” policy helped cement its position. Today, it operates 130 stores in Korea that produce £6bn annually in turnover.

In recent years, Emart has faced soft sales in a very difficult market environment. The consumer base is very homogenous and any significant point of competitive differentiation is immediately copied.

The challenge became clear – to achieve world-class retailer status, Emart would need to undergo a major transformation. It needed to more effectively engage customers through an experience unlike any other in the market. To enable this strategic transformation, Emart realized it would need a complete rethink of its hypermarket brand and experience, and to develop stand-alone retail formats to drive growth. It appointed Prophet to chart the way, using our strategy-led design approach as the basis for the process.

“To achieve world-class retailer status, Emart would need to undergo a major transformation.”

Building up an understanding of Emart customers was particularly challenging because Korean consumers all tend to have similar demographics, attitudes and shopping behaviors. Moreover, 80% were already shopping at Emart. That made typical segmentation studies about “who” was shopping there less germane than “why” they were.

It took a novel and innovative approach to identify segments based on trip types and their corresponding needs, the economics of different shopping occasions and how retail formats and shopping occasions intersect. Over a six-month period, we delved into why Korean customers shopped at both Emart and its competitors across 10 major product categories.

Eight occasions were identified – such as “everyday needs”, “quick mission” and “social outing” – and prioritized against brand and business credibility, along with execution capability. This selection became the filter for understanding the customer needs that had to be built into the brand.

Understanding customer behavior was one thing. Finding ways to link and drive their shopping occasions to an Emart versus a Lotte Mart or Tesco’s Home Plus – all major players in Korea – posed another challenge. Despite the popularity of its fresh groceries, the lack of cohesiveness in the rest of the store was a detriment to delivering the kind of clear brand story and consistent customer experience that can translate into brand loyalty and greater sales.

Emart’s hypermarket stores are typical of Korean retailing. From one section to the next, the style, feel and look are dramatically different. This promotes customer confusion. Shoppers are awash in a variety of point-of-sale communications. It all results in unclear messaging and an inconsistent experience.

Retail executives walk their stores with an eye on merchandising and signage. They don’t typically put themselves in the customer’s shoes to understand what they are feeling – excitement at exploring the store or dread at wasting time trying to fight the crowds to find five specific items.

We were able to put Emart’s leadership (and our own team) into its shoppers’ shoes by utilizing a technique we call Experience Attribute Mapping (EXAM). This allows us to map the customer experience in minute detail, from the customer’s perspective. From there, we apply elements of what the brand strategy should be at various key interaction points. How this greater understanding of Emart’s customers and the shopping experience will play out in a repositioned brand is still a work in progress. But Prophet was able to provide a taste of the possibilities through the development of three new store formats all designed and opened in 100 days.

The challenge was to transform an underperforming Emart store, which had been a Walmart, with formats that previously hadn’t existed in Korea: a warehouse/club-style store (minus membership requirements), a lifestyle-oriented electronics store and a pet store.

The 17,000-square-metre ground floor was given over to Emart Traders – characterized by mass merchandising, value pricing and bulk purchases of everything from fresh food to office supplies. Featuring a clean, simple and well-organized flow, it emphasizes deals, through bright and inviting signage, along with a merchandising presentation of open cases on shipping pallets.

Matrix, the electronics division, departs from the single-manufacturer stores that typify Korean electronics retailing. It emphasizes interactivity, with demonstration areas that hadn’t previously been employed in the market. It also focused on customer needs, with “watch” “listen” and “play” sections, which shoppers gravitate to according to the type of product they want. It also has a more urban feel – reinforced with graffiti on concrete surfaces.

The pet department, Molly’s (named after one of the Emart chairman’s dogs), shares the first floor with Matrix and is a huge draw to people who normally shop for pets through vets or online. The bright and lively environment features color cues to denote different departments – from the Beauty Studio’s (grooming) bright topaz blue to the blue and white of Molly’s Café where owners (known as pet parents) and dogs can enjoy a meal together.

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