We have entered an era where the most successful companies will be defined by their ability to resonate with their customers’ values. Years ago, product quality and superior service would put your company above others. But now customers take those for granted, because many companies have mastered them, and can rapidly deliver a product to a customer’s home with a just a few clicks on a keyboard. Now companies are seeking a competitive edge by adopting a philosophy about how the world should change, and then rallying customers to join them by buying their products. Consider these fundamental trends in society:
· We are more politically polarized than any time in memory. We are more inclined to think in terms of “us” and “them.” We’re feeling more tribal so we want to support like-minded businesses, and avoid those that don’t see things our way.
· Social media networks and online review websites make it easy to acquire and distribute information and opinions about companies, and even to organize boycotts. For better and for worse, the internet has given customers the voice to share with many people their appreciation or outrage.
· Businesses can lose billions of dollars in market value overnight when customers discover corporate malfeasance and decide they don’t want to be associated with those companies.
· Our paralyzed political institutions are not delivering the change that a significant percentage of citizens are demanding on global warming, social justice, economic inequality, and other issues. Companies are stepping into the void and pursuing progress using their internal policies, donations, business practices.
To give you some historical context for this new era, I prepared the following chart that summarizes the primary competitive differentiator for each period. I refer to these eras as “commercial zeitgeists.” (A zeitgeist is the defining ethos of a particular period of history as revealed by the dominant beliefs and values in society. The word is a German portmanteau that translates literally means as time-ghost, or spirit of the times).
Era Zeitgeist Winners--companies offering: Familiar Example Firm
1960s Marketing Clever commercials and ad copy Philip Morris
1970s Branding Safe choices in a turbulent economy Proctor and Gamble
1980s Quality Fewest product defects Toyota
1990s Efficiency Best products at lowest cost Dell
2000s Internet Virtual connections among people Facebook
2010s Convenience Products at your doorstep Amazon
2020s Values Synchrony with customers’ beliefs Patagonia
(This is a very basic chart to illustrate the concept. Reasonable people will disagree about exactly about how to define an era. Multiple forces are at work. You could argue, for example, that technology drove the 2010s, and convenient commerce was just the result. Also, the associated decades are for general reference only; complex macroeconomic movements do not obey a calendar.)
What causes zeitgeists to shift? There are many factors, but I think the most important is that the competitive advantage of operating a business under the current zeitgeist expires as other companies catch up. When the playing field levels out, businesses need to find a new way to differentiate themselves. Consider the example of automobile manufacturing and retailing in the United States during the 1980s.
With superior quality and durability, Toyota and Honda continually chipped away at the dominance of Ford, Chrysler, and General Motors, who largely ignored the competitive threat and continued to build crappy cars. By the end of the 1980s, the Honda Accord was the best-selling car in the United States for three years in a row, an almost unimaginable achievement for a company that had reached our shores just a few decades earlier (in 1959) with an initial team of only 8 people. But the “Big Three” eventually woke up. In 1992, after years of serious investment in quality, Ford’s Taurus became the bestseller, five years in row. By that time, manufacturing defects across the industry plummeted, everybody was building pretty good cars, and customers wanted more from their cars than just reliability. A new zeitgeist had begun, and others would follow.