Recession Provides a Chance to Build a Better Capitalism

Companies Can Shift Focus to the Long Term: Build Brands, Profits and Sustainable Operations

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Steve Forbes believes "capitalism will save us." He said so in an editorial piece that ran recently on the cover of his family's magazine, the proud capitalist tool. And he should be applauded for having the courage to give capitalism any props right now, given the state of the markets and the demands for regulation and decidedly un-capitalistic government intervention. You know he speaks on behalf of a generation of businessmen who believe that there's nothing fundamentally wrong with the system; that what we're seeing right now is simply another of those cyclical periods of correction and Darwinian winnowing of the weak; and that corporations -- if they're not too harshly penalized for the latest crises with more rules and regulations -- will soon resume their unstoppable march towards greater productivity.

He'll probably wind up being right. After all, 2009 won't be the end of the world as we know it. As Peggy Noonan wrote recently in The Wall Street Journal, if you separate yourself from the plummeting numbers and scary headlines on your screen and go outside, you'll notice that everything looks the same.

Whatever the statistics wind up saying and however inadequate our safety nets, we have safety nets, and we won't see (that many) angels with dirty faces shivering on our sidewalks. Capitalism is the only way we know, and the financial markets will emerge from the recession operating in ways remarkably similar to the ways in which they operated six months ago.

That would be a mistake. To simply complete a taxpayer rescue plan and then wait it out would be a missed opportunity to rework some of the principles of Western capitalism so it better serves brands, society and the environment.

Above all else, we'd do well to acknowledge that conspicuous consumption -- which has fueled economic growth since World War II -- is simply not a sustainable answer in a world in which we already have so many possessions. The storage industry is growing faster than almost any other sector and has been quantified as a $20 billion business in the U.S. alone.

Long-term thinking
If we continue to emphasize quarter-by-quarter growth above all else, we're bound to repeat the mistakes that created the current mess, because we're running out of space to expand into and genuine human needs to fulfill. Even the markets we talk about as "developing" are saturating scarily rapidly.

The list of evidence of looming catastrophe mounts daily, most notably in terms of the speed at which we're running out of fossil fuels and, of course, the apparently related warming of the planet.

Here's 40-year ecologist and biologist David Suzuki in a recent interview with New Scientist on the subject: "The industrialized world has only 20% of Earth's population but uses more than 80% of the resources and produces more than 80% of the toxic waste. I asked a top ecologist at Harvard University how many humans Earth could sustainably support, and he said 200 million if you want to live like North Americans. When I say this, people get angry. They say the stores are filled with food, we're living longer than ever, we're better off. Well, the reason we have the illusion that everything is OK is because we're using up what our children and grandchildren should expect to inherit."

Even if you are among those who still want to write off experts such as Mr. Suzuki as melodramatic tree-huggers, you must surely look around and wonder whether the profligate ways that we go about clothing, feeding, sheltering and transporting this ever-growing population of ours can truly be sustained for much longer.

From a business point of view, the majority of Ad Age readers -- because most of you have been involved in birthing or building a brand at some point -- know that the obsession with growing sales every quarter is frequently antithetical to building and sustaining a strong brand, too.

While there are exceptions to this rule -- such as Nike -- the list of great brands that have been damaged, even ruined, as they've been milked for growth rather than managed for profit is long and growing every year. (Starbucks and JetBlue definitely found places on that list in 2008.)

Vocal consumers
Sure, intangible assets on a balance sheet might keep rising while a company's market cap rises -- that's been a central but misleading measure of brand value -- but consumer perception of a product that's being pushed too hard for sales often deteriorates as corners are cut on product quality or brand experience, inevitably leading to the decline of the brand. Loyal consumers and advocates quickly become disenchanted complainers -- and these days their voices are heard.

In 2009 marketers, agencies and media owners have a chance to harness the mood of a country that needs -- and voted for -- change, to argue for a new era in business, too, an era in which companies and products are analyzed, valued and attract investment based on a range of metrics that reflect the challenges of the world we live in, rather than on their chances of growing sales in the coming financial period.

Rather than seeing companies and brands that are managed for profit as somehow lesser entities than those that grow revenue rapidly, we need to celebrate -- and educate investors about -- operations and products that demonstrate long-term profitability and strong brand metrics and have operations that are sustainable in terms of the resources they use.

It is surely not difficult to believe that focusing companies on brand (and a strong brand's corollary attribute, profitability), sustainability and their contribution to society will, at least, pay dividends among consumers. While the business media has typically celebrated the titans of industry because they were, well, the titans, consumers, particularly the younger generations of consumers, are moving toward a different way of judging business. They celebrate companies and brands that share their values, rather than those that have the most muscle.

And the growing ranks of activist consumers have replaced stone throwing and banner waving with the eminently more effective tactic of web-fueled campaigning and the wielding of their wallets.

New business sense
A new generation of entrepreneurs and companies is emerging that understands these consumers. At this year's Idea Conference -- see what you missed at -- we listened to a handful of the new generation, people such as Blake Mycoskie of Toms Shoes, Ian Yolles of Nau, Eric Ryan of Method, Tom Szaky of Terracycle, Robert Kalin of Etsy. They and their companies represent what could be a brighter future for capitalism. They're not crazy idealists; they're smart businessmen who have built environmental and social responsibility into their brands and business models and who understand that it's not about getting big at any cost.

It is difficult for bigger or older brands to emulate this new generation, but they can and must if they want to succeed in selling to today's informed and empowered consumers. Doing good, once considered optional, is rapidly becoming a price of entry in many categories.

Some have suggested that trend will reverse in a recession. But so far, the opposite seems to be true. I've spoken to many marketers who say they are seeing stronger responses to cause-related programs than ever before, and view them as an area in which they must continue to invest.

How can we account for this? Well, perhaps the desire for a change in direction is bigger among some people than concern about how many things they can purchase. The financial crisis has called attention to the inequities and inadequacies of the current capitalist system -- executives' enormous pay packages, private jets and other perks inevitably look worse than ever, set against a backdrop of struggling taxpayers bailing out Wall Street -- and could therefore play into a general desire for a different approach to business.

In 2009, we'll have a chance to frame that approach, a chance to remake our businesses and the businesses on whose behalf we work, to wean ourselves off the crack of consumption at any cost to our brands and our planet, and instead focus on profitability, sustainability and social responsibility. Maybe next year can be the start of something good, a different take on commerce, because I'm not sure we can honestly believe any longer that, in its present form, capitalism will save us.

Eight resolutions for next year

1. Learn not just how to analyze carbon footprints but how to audit the total environmental impact of a brand -- agencies, this should be a service offering -- and pick a way in which you're going to reduce that impact in 2009. No communicating externally until you have made a tangible improvement.

2. If your brand doesn't have a cause, go and get one -- one that has real meaning for the brand. If you haven't seen Goodby Silverstein's and Ketchum's work for Häagen-Dazs on saving the honeybee (and selling ice cream), catch up to it. Häagen-Dazs isn't Ben & Jerry's, but it found a relevant place to play.

3. Pick a local, entrepreneurial company that has a business model with social or environmental responsibility at its core, and go and work for them -- pro bono if there's no other way.

4. Ditch just one of your trips to Vegas next year, stay home and pick a handful of clean- and renewable-energy tech companies and make long-term bets on a handful of them. There are hundreds of tips out there, none of which I'd vouch for. But do read this:

5. In this post-advertising age, product is everything -- because consumers can find out instantly whether something is worth buying. Your job is to collect the insights that'll make products better, but you can also get involved in product design. If you do, you can help build better, longer-lasting products.

6. Hardware giants: Focus on sales of software applications and digital experiences and less on hardware. At least try to move beyond producing hardware that's built to expire, and instead give consumers longer-lasting hardware.

7. Marketing, media and packaging associations: Take the initiative on coming up with, winning consensus for and promoting a new, genuinely universal environmental accreditation and labeling system and a standard for where it goes on every package. There are too many systems and standards right now, and too many packages on which vital information is missing.

8. Everyone: Quote Phil Knight, chairman of Nike and arguably the greatest marketer alive. "The performance of Nike and every other global company in the 21st century will be measured as much by their impact on quality of life as it is by revenue growth and profit margins."

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