Businesses and threats - parallels with animal behaviour

You're driving down an unlit road on a moonlit night. Suddenly, a fox jumps out and is caught in the beams of your headlights. What happens? Typically, the animal just freezes for a few seconds, then it starts running along the road just a bit ahead of you. Once it figures that it can't outrun your car, it jumps out of the road, and presumably breathes a sigh of relief at its escape from the strange monster.

Sometimes companies behave in the same way while facing a totally unforeseen crisis. First comes the freeze, while the magnitude of the crisis and estimation of disaster and damage takes place, while the crisis looms even closer. While this is happening, things go on as usual, perhaps in the hope that the crisis will pass, it isn't a real threat to business, there'll be a solution round the corner, etc.

An good illustration is the Blackberry story. In 2009, it was the second most popular phone after Nokia (and that's another story) and now it's consigned to history. The hyperlinked article mentions that Blackberry launched a modern touchscreen phone in 2010, three years after the iPhone came on the market. Death freeze!

What do we do when we're about to be hit? We make ourselves as small as possible so that the area of impact is lessened - the passenger manual on any aircraft advises us adopt the brace position when an aircraft is required to make an emergency landing on land or on water, making us as small as possible in the seat.

A company 'sizes down' when it's survival is threatened. Not only does it shed people; it sheds activities that are non-essential to its survival. It sells of non-core businesses, it keeps only its cash-cows. If product and/or process innovations are key in its business, it will run a R&D effort as best as possible - in any case, most of its best talent will find greener pastures.

I'm curious to find other such examples of parallel patterns of behaviour, and not just in response to threats, so right now, Google search beckons. 

Hierarchy of needs for a business - some thoughts

Milton Friedman famously said, “There is one and only one social responsibility of business – to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” 

Leaving aside those businesses which do not engage in open and free competition and do indulge in deception and/or fraud, and who prefer to play outside the rules of the game, this quote has created somewhat of a philosophical divide between two types of businesses - those who believe that their only responsibility is towards its shareholders, and those who believe that their responsibilities extend towards a larger public of stakeholders as well. 

A good Indian example of the latter philosophy is the Tata Group, which publicly states that: "At the Tata group we are committed to improving the quality of life of the communities we serve. We do this by striving for leadership and global competitiveness in the business sectors in which we operate. Our practice of returning to society what we earn evokes trust among consumers, employees, shareholders and the community. We are committed to protecting this heritage of leadership with trust through the manner in which we conduct our business."

Does this kind of bipolarity reflect in the hierarchy of needs proposed in my last post? It can be argued that at the basic level of need - resources for survival - the most important stakeholder is the shareholders. All the other stakeholders - employees, vendors, customers, etc - are all via media to ensure survival. The importance of the community and society are not of a high order, since most surpluses generated need, necessarily, to be routed to the survival and health of the business. 

However, at the same time, satisfying the needs of employees, vendors, and customers are paramount to the survival, and most of such needs are legally protected. Hence, even at this basis level, a business has to operate with a stakeholder approach. 

In the context of the discussions on CSR over the last decade and a half, it can be seen that it is only from the second level of need - resources for growth - that CSR becomes meaningful and practicable. It is only from this stage onward that shareholders are likely to agree to forego some significant surplus to be given back to society, instead of being paid out as dividend. 

Of course, there are and will always be businesses, who play within the rules of the game as they interpret them. Some of their actions are quite harmful for their reputations - as this article and this one about Walmart tend to show. 

Fundamentally, however, it is likely that the owners of a business come with a belief in one of the two contending philosophies, and once the business is stable and growing, stakeholders other than the shareholders become important determinants on strategies and actions. 

Is there a Maslow's hierarchy of needs for a business?

Maslow's hierarchy of needs is one of the fundamental precepts in psychology and is ubiquitous in the world of business, marketing, human resource management, and elsewhere. We use it everyday of our lives and the pyramid below needs no explanation.

[Source: https://en.wikipedia.org/wiki/Abraham_Maslow]

If we examine a business over a period of time, one can make the case that there exists a similar hierarchy of needs applicable to a business. So, let's build such a hierarchy for a business.

At the bottom of the pyramid comes the need for survival - threshold level resources that ensures that the company keeps going. Since survival is not enough for most businesses, and the need to grow is paramount for the owners and other stakeholders, the second level of the hierarchy could be 'growth'.

After a while, a business seeks recognition and a feeling of belongingness in the area of business in which it operates. This is natural; when a company is born, the market and its competitors look at it with some degree of suspicion about its longevity, unless it brings some highly differentiated product and/or technology offering which carries the threat of upsetting the hitherto comfortable apple cart of the business domain. After some years of consistent growth and success, the business is now an accepted member of the space, and it seeks 'membership' of the business world. Ad and marketing communication agencies want to win awards; companies want membership of their respective trade associations, and to attend association meetings and network with their peers.

The next tier is respect. Businesses want to earn respect and want the world to show this respect. It can take various forms - talented people want to work for it; customers want to work with it; company leaders are voted to leadership positions in trade associations; the company is expected to set the tone in conversations about the industry, the market and other such matters. CSR starts to become an important strategy at this stage.

At the summit of the hierarchy is the tier I've called 'statesmanship'. The company has the resources to do things not directly or even indirectly affecting its state of health. CSR activities gather higher momentum and cover a larger canvas of operations. Company leaders start working with governments on issues which do not limited to its areas of businesses; the business commits resources to enhance skills and knowledge not purely for its own consumption.

Hence, the skeletal hierarchy could be depicted as below:



I've called it 'skeletal' since right now, it's just an idea - interesting, but untested, unproven, and it might not even be new!

I'd love to have readers send their opinions, constructive or destructive, examples of such descriptions from published sources, etc; I'd really love to learn in this area.

You must buy the Tata Tiago - Lio says so. Or else!

Imagine this about 3 decades ago - a typical ad agency brainstorming session. It is eleven o'clock at night, and outside it's raining like it only can in the Bombay monsoons. The meeting room is filled with leftovers of a samosa, Maggi noodles dinner and somewhat bedraggled account exec and creative types who'll get passed over by any fastidious cat. The ashtrays are filled to overflowing. The glasses and the bottle of Old Monk are all empty. Nobody has any money to go any buy another OM, and in any case the booze shops are all closed. And worst of all, we're supposed to present ads to the Bossman tomorrow morning, and there's nothing to show - nothing at all worth a d***.

That's when our Creative Director would open up and speak those golden words of wisdom which have resounded in the offices of ad agencies since the days of Pompeii: "Let's put a really pretty bimbo in the ad, and the client will love it. Make sure that she shows a lot of thorax, chest and midriff and we'll get approval."

Sex sells. Right.

Decades have passed, and the bright minds of Indian advertising have found something else that sells even better.

Celebrities.

I can imagine the conversation happening in the ad agency at another eleven o'clock at night brainstorm meeting. Of course, no ciggies, no Old Monk in the conference room. Now the CD says, "Stick in some celebrity mugshot in there, and we'll get approval."

In a seminar some months ago, a highly respected Professor of Marketing in one of the top business schools in the US gently hinted at his sense of surprise at the popularity of celebrity advertising in India; in his view, no other market uses celebrity advertising as much as India. One can easily believe it - we need Amitabh Bachchan, Sachin Tendulkar, and other assorted film, TV and sports stars to sell us anything from flipflops to payment banks to travel booking sites and shopping sites, etc.

Is it because Indian consumers really believe that celebrity endorsement means that the product is a better, more reliable product? That Salman Khan actually uses Bahamas flipflops? Maybe they do - going through a few hundred assignments from MBA students over the years have convinced me that the writers of such assignments really believe that celebrities bring credibility.

So, all the things we were taught about the vampire effect, and matching brand values with those of the celebrity are perhaps old hat. Perhaps, sticking a celebrity into the ad is a hidden confession of the lack of ability to think of a strong creative idea, and hence an easy escape route.

So, the idea is that when the finest footballer in the world, Lionel Messi, exhorts us to rush out and shell out Rs 4 lakhs for the Tata Tiago, we should be doing just that. Maybe the Tata guys are right - according to this, Tata Motors received over 1 lakh enquiries for new Tiago by mid April. Sales were perhaps not as spectacular, if this is to be believed, but it's early days yet.

Tata Motors receives over 1 lakh enquiries for new Tiago

Read more at:
http://economictimes.indiatimes.com/articleshow/51877959.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Tata Motors receives over 1 lakh enquiries for new Tiago

Read more at:
http://economictimes.indiatimes.com/articleshow/51877959.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Or is it just fanciful thinking? Car buyers in the Tiago category may not care at all about Lio or any other celebrity endorsement, but are more concerned over mundane matters like "Kitne deti hai?"

I've tried to get stats from my friends in market research about the role that celebrity endorsement plays in advertising and the specific areas of influencing consumer behaviour, but no success - their data is of course for privileged access only. Perhaps a reader of this post may wish to point me to some data which is in the public domain and does address this question.