Hot Business Issues

PART II

I must apologize for being so late coming back to the second part of my last post where I promised to deal with the low trust for our governments and possible remedies to this situation.

A simple review of the information available from surveys around the world makes one thing very clear. Citizens don’t trust their governments and their politicians and the levels of trust have dropped to new all time lows.

Attitudes and trust in government in the US

Americans are less positive and more critical of government these days. A recent Pew Research Center survey reveals a multitude of conditions associated with distrust in government –“ a dismal economy, an unhappy public, bitter partisan-based backlash, and epic discontent with Congress and elected officials”.

Citizens in the US don’t want an activist government to deal with the nation’s major problems. What they demand is for  government to  reform and its powers curtailed with the exception of greater regulation of major financial institutions, as well as  more government control over the economy. The graph below illustrates changes in the level of satisfaction with the state of the nation and trust in government over the past 32 years. As we will see later a very similar trend behaviour is exhibited in Greece.

Europe and the special case of Ireland

The latest Edelman Trust Barometer, highlights that in contrast to other European countries, Ireland is experiencing a profound and continuing trust crisis. Trust in government and business in Ireland is the lowest in Europe with the possible exception of Greece, with business falling from 38% in 2009 to just 31% in this year’s survey. This is against a global average of 50%. Government (or better the political process) scores a bit better but with trust levels plummeting to an all time low of 28% from 31%, against a global average of 49%. Trust in media and NGO’s has also fallen, but to a lesser extent.

According to the survey, the findings show that Irish people have the lowest level of trust in politics and business in the 22 countries surveyed. Conversely, countries such as the US, Sweden and France experienced a small increase in levels of trust, further underlining a deep institutional scepticism in Ireland. Ireland was the only country surveyed that experienced declines in trust across all four institutions, business, government, media and NGOs. According to the survey  “Ireland is experiencing a trust crisis which is different to the experience in other countries. Our scepticism is deep rooted and pervasive. While other countries are beginning to see increasing levels of institutional trust as their economies creep out of recession, we in Ireland have lost confidence in more institutions than ever before.

The recent case of Greece

The recent financial crisis in Greece lead to the involvement of the IMF in the economic affairs of the country. Severe measures were undertaken with profound effects in the life of the people. Such measures included  reductions in pensions, age limits, cut offs in salaries, steep increases in taxes both direct and indirect, further taxes on real estate  property to mention just a few. Although the measures are extreme, the people of Greece realize that given the situation these measures were to a great extent necessary. However this necessity did not reduce their feelings of disappointment which reached an all time high of 70,1% the highest since 1988. Other words that describe the mood of the Greeks are:

anger 57,9%,

fear 49,2%

shame  37,3%,

defeat 16,4%

Source: Bi-annual survey TRENDS of MRB Hellas

The latest measurement of TRENDS (June 2010), reveals that citizens in Greece when asked “how are things going in your country?” 91,1% answered badly or very badly and only 0,6% said good or very good, thus producing a negative index of -90,5% the lowest since 1989 when the index was -73%. This mood is also reflected in their answers to the question “which party can best deal with the country’s problems?” The socialist party in power gets just 30% and the opposition party only 20,3%. The answer “no party” collects an overwhelming 42,2% compared to a mere 15,7% in May 2004.

So, let’s summarize our thoughts. All evidence indicates ( GLOBESCAN Survey) that consumers around the world demand from business to be sincere, trustworthy, transparent and responsible, if they are to restore their damaged reputation and trust. In other words consumers concentrate on the concept of corporate citizenship and transparency. That’s why a solid CSR strategy is absolutely necessary for business.

In their role as citizens of their country the same people demand from their governments and politicians the exact same things. They demand from them to be honest and speak the truth and to give them hope for the future. However, there is a catch here. Hope by itself is not enough. People want hope which is based on firm foundations, will be sustainable and will be explained to them of how it will get them through the difficult  and sometimes brutal changes they are experiencing in their everyday life.

Only then, the people will begin to believe again in their leaders and will be willing to contribute to their country’s efforts.        `

Today we are witnessing a serious lack of trust among citizens around the world. Consumers are questioning the way big business is doing business. Consumers, citizens and taxpayers shocked by the collapses in the financial and real estate sectors, don’t trust big business anymore. And this mistrust has snowballed and affected almost all sectors of the economy. But even more serious is the deterioration of trust of the citizens for their governments and politicians. And this phenomenon is enhanced by the deep effect of social media.
Today we are witnessing citizens rioting in the face of the austerity measures that put their very lives in jeopardy. They are angry because they feel that governments and politicians were not honest and they shamelessly lied to them.
For too many years people in most countries were relying heavily on their government for the creation of wealth, the smooth functioning of the markets and for providing a safety net when in need. But today after the recent economic disaster we have lost the trust in our government as well.

We all must keep one thing in mind: trust is a very fragile concept. When it is cracked or damaged it’s very difficult to repair it.
If we consider our behavior as consumers we still buy our favorite brands or services from companies we know but our trust and esteem for them has seriously deteriorated. Especially after the global crisis we are much more demanding and more ready either to punish or reward businesses and brands. Extensive research in more than 30 countries (see link below GLOBESCAN) reveals that consumers and citizens are asking demanding questions about corporate citizenship and the ethics and transparency of management. We now associate trust not only with the quality and performance of products and services but also with the performance of business as a corporate citizen. Exactly the same holds true with the way we look at governments and politicians.
We might trust a brand’s or a politician’s competence and abilities but we don’t want to support them with our money or vote. The reason is simple: we feel they are not entirely honest and don’t treat us with respect.
Businesses in their effort to remedy this situation are resorting in the use of CSR and are investing even in the face of difficult financial conditions. However, they must be very careful because consumers are suspicious and question their good intentions. If they believe that a business is investing in CSR activity solely for its own good and gain, its efforts will be in vain.
If we ask what our politicians and our governments can do to gain back our lost trust the answers are a lot more difficult to find and the healing process will definitely be much longer. I’ll intend to come back to this issue on my next post.
GlobeScanRadar_CSR2010_Webinar_April8_v2

“ Interactive marketing will near $55 billion and represent 21% of all marketing spend in 2014 as marketers shift dollars away from traditional media…” Forrester Research 002180.forrester.interactivemarketingprojections

As mentioned in the report titled “US Interactive Marketing Forecast, 2009 to 2014,” interactive marketing spend will increase from 12% today to 22% in the next five years. Money will shift from traditional marketing and advertising channels into social media, email and mobile marketing”.

We have discussed this powerfull trend in past posts of Hot Business Issues (December 20 and November 21, 2009) and pointed out that a major issue troubling businesses is how one can be sure that the money is efficiently spent. Simply transfering money from mass media to search marketing and online display advertising is not always the answer. Without a strategy and appropriate tools with which to measure success, little if no advantage is gained.

At the same time, consumers are demanding more from businesses. They want appropriate and relevant content tailored to their needs for information and knowledge. Thus, we come to some very simple conclusions useful for businesses in their efforts to take advantage of this new trend.

1. Foremost is the realization that interactive will definitely cannibalize traditional media.

2. More than 40% of marketers believe that “marketing is the strategic leader in their organization. and Forrester predicts that CMOs will begin to buy their own technology and focus on interactive solutions like Web analytics and email marketing.

3. Search Marketing has a leading share of the interactive budget and will continue to be very important in the future

4. Social media become an integral part of the interactive marketing mix. More companies will embrace social media and Forrester points out that 64 percent of marketers already invested in social media applications and 30 percent more will be added by the end of 2009. This creates a need to measure user interaction and activity with your brand on social networking sites.

5. E-mail marketing will continue to grow fast since marketers see this as an economically efficient method to reach customers. Forrester points out that email marketing is overtaking direct mail as a better way to communicate with customers.

6. And finally we see the evidence of strategic mobile application development. Everyone is participating these days in developing mobile applications.. With the increase of applications, an opportunity will arise for marketers to use this means to reach their customers.

I have argued many times in this blog that the economic crisis contributed to a severe drop in trust in business. Americans and citizens in most countries express the belief that business cannot be trusted to act responsibly. This fact is supported by the global research carried out by GlobeScan’s CSR Monitor and this trend is increasing. And that is not the end of the story, as an ever increasing percentage of people in almost every country studied said more laws are needed to regulate corporate social responsibility.
The interesting finding is that the deteriorating trust for business is accompanied with rising expectations of business for corporate citizenship and social responsibility. with the majority of opinion leaders expressing the view that business has not done enough to address key policy issues ie. the environment

In the U.S. almost 3 out of 4 managers and entrepreneurs believe that today businesses must show leadership, and commitment in keeping corporate citizenship on top of their list of priorities.

Thus, while recognizing the financial pressures of the recession, citizens all over the world still expect companies to make corporate citizenship a core strategic goal of how they do business. There is however a difference in the way small businesses approach the issue. They are reluctant to fire their employees and grind their teeth in an effort to keep the working environment stable. On the other hand large corporations are more prone to laying off large numbers of workers but they compensate by keeping up with most of the corporate responsibility plans.

Today we are experiencing the greatest crisis of confidence
and trust in business and the markets since the 1929 depression.
This is a key factor contributing to the present economic downturn. The current financial situation causes significant business
and social challenges. We must deal with these problems and furthermore must act in ways that minimise the damage to long-term
business value.
The present crisis has many causes which I believe they show the importance that responsible business principles play in strengthening and restoring the damage caused to relationships with the market, our clients , our employees and suppliers.
There is strong evidence from numerous research studies that
responsible management of environmental and social issues
improves financial performance. Companies which have been
measured when they managed their corporate
responsibility through the Corporate Responsibility Index Tool
(CR Index) exhibited a better financial performance than
the rest of the industry.
Good corporate governance is instrumental in guiding responsible business practice, and contributes to
• positive workplace management,
• marketplace responsibility,
• environmental performance, community engagement
• and sustained financial performance.
If we ignore any of these critical areas we will probably experience an adverse impact on the overall performance and the competitive advantage of our business.
http://www.bitc.org.uk/

An estimate given by J. Bernoff of Forrester Inc.a year ago indicated that only 16% of online consumers who read corporate blogs actually trust them. I believe that this is absolutely true because corporate blogs that talk about their products are not worth the time required to visit them and read their content. Blogs and especially corporate blogs make sense if they are “usable” and exercise “thought leadership”.

Here are some universal blogging thruths:

• Corporate blogging is not about companies and their products or services it’s about the customers.
.
• If we are to rise above the crowd our corporate blog should be about the customer’s problems.

• If we can bring value to our present and potential customers by talking to them about their problems and needs, then they’ll become loyal visitors to our blog.

• If our offering is known and liked, then we can mobilize those loyal customers with our blog. As a result:
our customers are gradually organized into an interest group with common agendas, then we can encourage them to connect, through our blog , with one another and create a “snowball effect” in our favour.

• If the corporate blog is B2B, it should not be written by a communication expert. The only way to do it is to involve the marketing and sales staff who are in a position to understand the customers’ needs. Only then will our customers participate in the dialogue and trust the content of the blog.

In conclusion:
Standing out from the crowd becomes a very difficult job and those companies that shamelessly blog about their products and services are just adding water to the mill of those who argue that corporate blogs cannot be trusted.

On the other hand, honest and transparent blogs that address the customers needs will definitely attract appreciation and awareness.

002180.forrester.interactivemarketingprojections
Hot Business Issues in four recent posts, Nov 21st and 14th and October 19th and 15th, presented new prevailing views of the changes we are facing affecting the importance and role of digital and traditional advertising. The subject created a lot of interest and heated discussions and on many occasions opposing views were put forward. The recent study and forecast for interactive media constructed by Forrester, sheds some further light on this argument and points to changes and what we might expect to experience in the near future.
The main conclusions can be summarized as follows:
Interactive media will further cannibalize traditional media.
This trend will be intensified because of poor economic conditions,
the boom in interactive customer relationships,
the increased power the marketing is gaining within the organization,
and the prevailing belief and proof that interactive marketing works.
As a consequence, only in the US interactive marketing expenditure will more than double exceeding $55 billion by 2014. The same robust increases will be realized around the world with investments in e-mail marketing, search marketing, on line display ads, social media and mobile marketing taking over substantial parts of the marketing budgets.

For some time now the Energy Race was driven largely by economic rather than ecological incentives. Governments, in cooperation with investors and entrepreneurs are stepping up efforts to reduce our dependence on fossil fuels. However, be aware that this mega goal won’t be easy or cheap, despite the fact that numerous innovative ideas are being developed around the world.
On the other hand, consumer awareness has been rising and interest in green products and the green way of life is surging. Consumers feel better about consumption when they choose brands and retailers that exibit a green philosophy and ethic. We expect businesses that adopt sustainability policies will gain competitive advantages in their markets.
A recent study by JWT addresses the issues.

Key Questions Investigated
• Why is clean energy an important goal, and how has it become a priority all around the world
• What is the role of the public sector in the Energy Race? or of the private sector? Which countries are making significant progress in this direction?
• What alternative energy sources are attracting the most interest and investment?
• How are consumer priorities are influenced by the issue of energy conservation, and how are businesses addressing these new priorities?

Key Findings of the Study
1.Climate-change skeptics have lost their footing, but the prospect of global warming is only one factor driving the Energy Race. The current international search for energy has serious political and economic consequences for governments and consumers.
2.However we should be aware that good intentions or modest inflows of money to this direction are not enough and also have the danger to raise expectations but result in mediocre energy savings
3. But at this stage, it’s unclear which clean energy solution will win. Many ideas are being developed that may in the future prove more viable than today’s leading options, such as solar power and wind energy.
4.As government and investors work together to fund green energy projects, more people are thinking about how they impact the planet and are acting accordingl by buying hybrid cars, and purchasing carbon offsets
5. There is no doubt that businesses who will lead these initiatives will gain competitive advantage.
6.Corporations and governments, both national and local, are fast coming to understand just how powerful, and profitable, an early role in the Energy Race can become.
However, one word of caution is appropriate especialy now that economies are in deep trouble and consumers are counting their scarce resources.

Recently a very interesting dialogue has been going on in a LinkedIn group of which I am a member concerning the question of whether the art of entrepreneurship can be taught. Fifteen years ago when I was chairman of the Management Association of my country at the time I took the iniatiative and helped establish the Entrepreneurship Club and later I served as its President for eight years.
So,I thought I might submit in my blog some of my experiences and thoughts on this subject and will try to answer two questions: “ Can entrepreneurship be taught?” and “Has the government any role to play in facilitating entrepreneurship?”
This is the entrepreneurial age. Entrepreneurs are driving a revolution that is transforming and renewing economies worldwide. Entrepreneurship is the essence of free enterprise because the birth of new businesses gives a market economy its vitality.
New enterprises generate most of the new jobs. According to some estimates, a thousand new businesses are born every hour of every working day in the United States. Within five years, small, growing firms with 100 or fewer workers generated 7-8 million new jobs in the U.S. economy, whereas firms with more than 100 workers destroyed 3.6 million. By the way, since we are experiencing one of the worse recessions of the century we and the goverments around the world should exercize great care not damage this job creating machine. If anything goverments should go out of their way and encourage in every way new entrepreneurs
Anyway, coming back to our subject: an entrepreneur is someone who perceives an opportunity and creates an organization to pursue it.
The entrepreneurial process involves all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them.
But can the art and science of entrepreneurship actually be taught? Or is the birth of a new enterprise just happenstance and its subsequent success or failure a process based on chance?
Although ten years ago many business school gurus maintained that entrepreneurship could not be taught, entrepreneurship is today the fastest– growing subject in the business school curriculum.
Today the process of creating a new business is well understood and most of us believe that entrepreneurship can be taught. One cannot guarantee that by itself the teaching of entrepreneurship in our business schools will produce the tycoons of tomorrow, but students with an urge to start a business will receive education that will make them better entrepreneurs.
Addressing the role governments can play in facilitating entrepreneurship, I can only mention what we have repeatedly recommended to our government officials.
The first recommendation has to do with how the government can influence the imagination and inspire its citizens to consider starting a new business thus creating a higher number of nascent entrepreneurs. This we believe can be achieved through the educational process starting with lessons from the early years and continuing through high school and technical and university years. We have to recognize the fact that in many countries, including mine, our youth was exposed for decades through the educational system to views that were, to say the least, not positive towards the role of the business and the entrepreneurs. To the contrary there was a kind of propaganda against it.
The second recommendation was to grasp the opportunity that the European Union and other central goverments are offering for funding and gear most of these programs towards funding new entrepreneurs.
The third recommendation is an obvious one: goverments should remove all the barriers and bureaucratic obstacles that a new entrepreneur faces when it comes to establishing a new business and believe me in many countries this is a real nightmare.

1. Consumers are researching the offer
Consumers will be putting more time and energy into finding good values, reading the labels and the service agreement and will be more informed on nutritional facts, environmental impact and ethical business practices

2. They are also looking for stability
While many economic indicators point to a light at the end of the tunnel , consumers will continue to be cautious and will be hesitant to commit when it comes to important purchases.

3. Necessity allows emerging market products to enter the developed world.
Products designed for emerging markets are increasingly becoming popular in the developed markets, where consumers are accepting them as cheaper and simpler alternatives to existing choices.

4. Green is entering our lives
As the ecological influence increases, producers will pay more attention to the environmental costs of packaging, and brands will increasingly switch to bottles, boxes and other solutions that reduce waste .The trend will be to reuse, recycle, remove and renew.

5. The disclosure trend is intensifying
Legal requirements and competitive pressures will force producers to fuller disclosure about everything from ingredients to carbon footprints and sourcing

6. Real time revolution
The Web is evolving into a constantly updating stream of real-time information, conversation, memes and images.

7. Products and communication will have an open eye for the older generation
As the world’s population grows older, we should be ready for a proliferation of products and services that cater to this demographic segment as they strugle to live independently for as long as they can. Communication will also be adapting to the habits and life style of this group.