There is a huge upside to the risks of disruptive values leadership.
What’s the link between climate change, the resurgence of the U.S. Covid epidemic, a bag of potato chips and what you wear? Behavioral economics suggests it is short term, often impulsive, human emotions.
Compared to traditional economics where rational markets settle on prices that balance supply and demand, behavioral economics views them as a tug of war between human rationality and impulsive, often addictive, human emotions like pleasure, prestige or social affiliation/standing. In this view, there is one price at the cash register and an actual price that includes externality costs like a Covid resurgence, climate change or obesity.
The 20th century has made impulse marketing as American as apple pie. Retail business competition is a race to find the next revenue engine like super-size-me “value meals” that stimulate immediate, incremental individual sales revenues with relatively minor incremental costs.
The result is that about 70% of clothing purchases are impulsive. The externality costs include a fashion industry annually consuming 21 trillion gallons of water while generating 203 trillion pounds of waste.
Approximately 60% of food purchases are impulsive. That externality cost is measured by 40% of Americans being obese.
Values Positioning Is the New “Kansas”
What business leader is not feeling the earth shift underneath them on values positioning? Like Dorothy in The Wizard of Oz there is a growing sense that “we’re not in Kansas anymore” as businesses are forced into taking often divisive values positions to attract or keep customers and work associates.
Think Norwegian Cruise Line. Their values commitment to guest safety is being challenged by the Florida governor over their largest U.S. port.
Think Ford. No business can afford to ignore a decarbonization technology future that will deliver both lower costs and net zero emissions. But embracing that future can threaten existing product revenues and customer relationships. Ford’s F-150 is the industry’s best selling, most profitable vehicle. They are literally betting their company that they can transition their most loyal customers into the all-electric F-150 Lighting.
This new “Kansas” will be discomforting. It can be extremely risky. But the alternative is even riskier with costs measured by supply chains disrupted by climate change enhanced severe weather or losing millennials and GenZers as customers and work associates.
Growing Sales and Profits with Disruptive Values Leadership
There is a huge upside to the risks of disruptive values leadership. Think Elon Musk. In a “be like Mike” moment, he has the entire auto industry chasing his technology and branding leadership.
But what the auto industry still confronts is Elon Musk’s disruptive vision leadership. While they “transition,” Musk is implementing a value vision of mass market technology solutions that solve climate change. Tesla’s overpowering values connection to LOHAS (Lifestyle of the Healthy and Sustainable) consumers made them into the company’s early adopters. Tesla’s values commitment captures the millennial and GenZ generations’ aspirations to be “cool with a purpose” and making a difference.
Tesla is not an island. Patagonia shocked the clothing industry with its iconic ad campaign of “Don’t Buy This Jacket.” That ad, and the company’s aggressive implementation of sustainable values in their products and practices, has won for Patagonia the admiration and loyalty of the millennial generation. Patagonia is their most beloved brand.
Chipotle is another company that has won market share and profits by selling values. Their 2013 “Back to the Start” video, promoted on YouTube, made the millennial generation their breakthrough early adopter customers. In one brilliant stroke Chipotle separated itself from its competitors by committing to only selling sustainably produced, good food. Ironically, their commitment gave them the credibility to survive their food health preparation crisis. Today, Chipotle’s stock price is approaching $2,000 per share which is four times its 2013 stock price.
Disruptive Values Leadership Is the 21st Century Business Growth Strategy
At the end of the day which business would you rather have? Ones like Tesla, Chipotle and Patagonia? Or ones like your local utility fighting to protect their monopoly and 20th century investments against mass adoption of customer owned renewable energy systems that deliver both lower electric bills, higher reliability and reduced emissions.
The 21st century business leadership reality is that the risks of managing versus disruptively leading are now becoming tangible as companies that align value with values seize market share.
Paraphrasing Hamlet’s Polonius, “to thine values be true” is the competitive leadership path for winning customers and growing sales in a 21st century that now confronts paying the piper for the 20th century’s impulse marketing successes.