More from Dr Peter Steidl on the ‘fear economy’ and corporate resilience.
The Fear Economy and you – seven questions.
In this, Part 2 of The Fear Economy, I discuss some of the more pressing questions that face organisations in the here and now.
1. What is resilience?
As global corporate citizens, we are facing multiple challenges, each presenting a massive barrier to progress. Covid-19 is not yet defeated and while we are learning to live with it, we must expect more disruption from mutations or new viruses. The latter is, according to scientists, more likely as the warming climate is facilitating the transfer of viruses from animals to humans.
The war in Ukraine is unlikely to come to an end anytime soon, and the supply chain disruptions caused by the war, as well as the sensitive relationship between the United States and China, is likely to persist. A massive disruption triggering a global recession would occur should China invade Taiwan, as the latter accounts for 60% of global chip manufacturing. The impact on many industries, from electronics to automotive, communications, white goods, energy grids, and more, would be unprecedented.
We are currently witnessing inflation driving up the cost of living. Central Banks are raising interest rates to get inflation under control, and this is likely to lead to a recession.
The monetary authorities will have to walk a tightrope for years to come as one disruption chases the next.
Climate Change is, of course, the most disruptive development, albeit with the impact building slowly. But rising sea levels will cause major disruptions to hundreds of millions and have a massive impact on the global economy.
And as if this would not be enough on our plate, we will see the number of refugees and homeless people increase sharply, mainly due to the events outlined above.
No doubt - there will be periods of relative calm, but the Fear Economy is here to stay for many years to come.
2. Is it necessary for your organisation to change its relationship with risk?
Corporations and businesses typically focus on avoiding risk rather than aggressively pushing for progress. There are a multitude of checks and balances, reviews, oversight committees, and rule books to slow change down. After all, incrementalism is less likely to carry risks – at least under normal circumstances.
This is understandable: Who wants to build a major corporation or business and then make risky bets. You want to preserve what you have built. And arguably even more important:
There are so many parties involved that the only way to ensure some consistency and prevent radical moves is to exercise control. As frustrated as one might be with systems and processes, the time it takes to get a product into the market, or to make an adjustment to a brand’s positioning, we cannot escape the fact that control is a good thing when the intention is to protect rather than to progress.
But there is another reason for resisting rapid change; a successful organisation has aligned its whole operation with the market it is serving, thus optimising its return. This makes sense as, most of the time, markets only change incrementally. Until, of course, they don’t. And right now, we have reached this point where they don’t.
To survive or even thrive you must adapt rules, processes, strategies, and cultural norms that have been designed to maintain the status quo, limiting progress to incremental steps forward. The Fear Economy will favor those who take risks – unless you can benefit from it (e.g., pharma industry, game developers, electric vehicle manufacturers, etc.) or have massive resources at your disposal that allow you to outlast your competitors.
3. Are you ready to become a corporate outlaw
Above, I focused on the organization, but now I want to be more personal and check where you stand. More specifically, are you willing to become a Corporate Outlaw?
While others seek predictability and safety in incremental change, the Outlaw searches for new ways of doing things to achieve a better outcome, breaking the very rules that are at the heart of the organisation. Yet, what should you do when the operating environment changes overnight, when the market collapses or purchasing patterns shift, when your business may find itself restricted by government regulations such as lockdowns, when you find that everything you have learned in the past is suddenly less useful, maybe even redundant?
Suddenly incremental change is risky because it means you are sticking with what worked in an operating environment that does not any longer exist. Exploring radical new directions and options might suddenly look like the less risky path leading to a better future.
The Outlaw seeks to find new ways to connect with the market; to adapt processes and systems to lift the agility of the organisation; to find ways of managing productivity when (a share of) the workforce works from home or is severely depleted; to diversify into new areas that are less affected by the disruption that has changed the ‘old normal’.
But here is the rub: Any new initiatives are likely to die on the vine due to the corporate processes and procedures that are designed to minimise – ideally eliminate – risk. Much work has been done on how to keep new ventures alive within corporations and, not surprisingly, the recommendations invariably point towards running parallel systems and procedures in areas where the existing ones would severely discredit a new venture.
What are you going to do? Does the vision of your future see you as an Outlaw or an Incrementalist? Are you going to rattle the cage and break out, or try to fit in and get comfortable spending your future in your cage? Are you going to look for better ways of doing things to get a better outcome even if this means breaking conventions, or are you aiming at delivering predictable, incremental results while trying to preserve business-as-usual?
Let’s face it, you most likely don’t know your chances of success with respect to either option. But what do you want to think of as your achievement when you get your golden watch at your retirement? And what is going to bring more excitement and adventure into your life? Maybe you should seriously consider becoming an Outlaw – and if you can’t where you are, maybe it’s time to change jobs.
4. Are you ready to burn your ships?
In 1519, Hernán Cortés landed in the New World with six hundred men and, upon arrival, ordered his ships destroyed. With no way of turning back he and his troops succeeded in his conquest of the Aztec empire.
Maybe you need to face up to the fact that your ships have been burned too. I am referring to the massive trove of historical data many organisations have gathered. Data that is useful when testing, and projection strategies and tactics in a stable environment. Unfortunately, we are not any longer enjoying stability and the disruptive period we are going through is devaluing historic data.
When the world changes, historic data not only becomes irrelevant, but it can be misleading. It is a brave move to clean the slate and start from zero, but you are likely to find new opportunities and impactful strategic directions when you do!
5. Does this challenging environment offer opportunities?
When the consumer’s life is disrupted - when stress, a fear of what lies ahead, confusion, and a lack of leadership limit their sense of wellbeing - they are more likely to embrace a brand that provides them with a glimpse of hope, helps them to overcome their fear, or demonstrates strong and meaningful leadership.
There is no doubt that there are opportunities for marketers to take their relationship between their brand(s) and consumers to a higher level, to build a Brand Tribe, or to use neuromarketing tools to shape purchasing behaviour.
The challenge is to decide on how to allocate your marketing budget. Here's a simple rule that may provide a starting point. Think about allocating 70% of your marketing budget to build on the foundation and initiatives you have already established. Use neuromarketing tools to lift the return on marketing investment, review and reallocate funds to the most promising initiatives. Then spend 20% on important initiatives that will benefit you in the future, such as building a higher-level relationship with the consumer or a Brand Tribe.
Finally, allocate 10% to fund moonshots, i.e., far-out initiatives that deliver something unexpected, but relevant given consumer sentiment.
You may look at the 70:20:10 allocation and decide that this is not appropriate for you. Just change it. The important point is that you decide on an allocation framework that balances your immediate needs with investments into your future.
6. How do I get my team battle ready?
Human resources cannot any longer focus on plotting career paths, selecting and evaluating employees, boosting productivity, or instilling corporate values. Rather, the focus needs to be on employees who are confused, unsure about the future, possibly even anxious and sometimes thrown into a new way of working, and need help to boost their resilience, i.e., to adapt to what they can’t change and to make positive changes where they can.
If you lead a marketing team you are facing the same challenges, just on a smaller scale. The best strategy will fail if it is not implemented properly. This means your team’s ability to focus on, and address implementation challenges is of paramount importance. Stressed team members whose mind is occupied with challenging future scenarios, who worry about their jobs, the cost of living, their career options, and generally about the quality of their work life are not battle ready.
Importantly, resilience is not just about surviving or adapting. Resilience is about adapting to what we can’t change, while taking action to make positive changes where we can. The second part is important; don’t think of your team members as needing to be fixed, don’t apply a band-aid solution. Rather, make them battle ready and give them the skills and tools they need to make positive changes where they can.
7. How can I boost the impact of my (now) limited marketing budget?
If you are facing a diminished marketing budget, I recommend you have a careful look at neuromarketing, which is not a new approach to marketing, but rather boosts the impact of traditional marketing strategies and initiatives. There are a number of low-cost tools you can use to lift your return on marketing investment.
Priming can be a lifesaver when the economic pressure builds, and consumers reassess their purchases. Importantly, priming quite often does not cost anything – it just requires you to make some changes to how you design touchpoints, from package design to your brand identity, marketing communications, brand activations, environmental design, social media practices, and anything else you may have in your marketing repertoire.
In case you are not entirely sure what I mean by primes and priming, here is a boring definition:
Priming is an unconscious process where exposure to a stimulus has an impact on behaviour – in this case on a buying decision.
Another sound step is to give extra attention to the decisive point where the sale is made or lost. I am obviously referring to shopper marketing. With many consumers reviewing their purchases and considering cheaper alternatives, you must try to shape their decisions where they are being made; at the point of purchase. This has the dual purpose of keeping existing consumers loyal, while picking up those who are reassessing their relationship with competitive brands.
Finally, give some consideration to brand vision archetypes. An archetype, when applied correctly, ensures all your touchpoints are aligned, an especially important factor if you’re operating with a limited marketing budget.
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