Science and Management[1]
Keys to Corporate Success in Contemporary Society
Jean Staune
In the first article of this series we saw:
We will describe this impact here and identify the factors which can lead to a firm's success.
It should be pointed out at the outset that science exercises an influence on society in two distinct ways: directly, via the effects of the technological progress it generates; and indirectly, by changing our view of the world, which in turn, influences our expectations and behaviour. As the former factor is well known, we will elucidate the latter.
What are the main concepts of today's scientific revolution?
We can identify four:
Just as Pavlov's dogs salivated upon hearing a bell announce its food, so the concept of marketing has for a long time been based on the same stimulus/response mechanism. The argument goes that if you spend more on advertising you sell more, and if you are 5% cheaper than your competitors, you'll sell more. This is verified by experience and easy to explain. The reasoning is purely quantitative and the process deterministic.
This is why, in the 20th century, the 'secrets' of selling taught in business schools have been purely quantitative. But, despite the fact that significant changes have been observed over the last few years, no business school (to my knowledge) has yet reached the point of teaching marketing students how a company can increase sales without advertising and sell products that are 30% more expensive than its competitors! Yet a number of firms have achieved just this feat over the last ten years, both in France and internationally. Their secret lies essentially in generating customer loyalty built on an intangible link between the customer and the company which goes well beyond the phenomenon of the 'brand', and originate instead in a growing desire among customers to give a meaning to their acts of consumption.
Let us take the case of Nature et Découvertes. This chain of shops, similar in concept to The Nature Company, but far more international in outlook, increased its turnover from 61.6 million Francs in 1991 to 296 million Francs in 1996, and opened 29 largely self-financed shops in five years, permitting its founder, François Lemarchand, to remain the majority shareholder. All this was achieved without advertising and with high profit margins.
This achievement resulted from the establishment of another business concept, such as found in other successful firms like the cosmetics manufacturer the Body Shop and Ben and Jerry's home-made ice-cream.
The Nature et Decouvertes catalogue begins with a summary of the company's philosophy and educational role. Without this, the catalogue would be a patchwork of juxtaposed objects: perfume bottles, microscopes, lamps, pocket knives, telescopes, boomerangs, etc.
The guiding concept of Nature et Decouvertes is the rediscovery of nature. The shops, whose soft lighting recreates the light of a forest (where as it is generally considered that strong lighting is essential to attract customers), are located in dense concrete shopping centres (to heighten the contrast), play bird songs (whereas it is said that the tempo of rock stimulates the impulse to buy) and cost 14,000 Francs per square metre, compared to an average of 6,000 Francs per square metre for their neighbours. The concept is not limited to the displaying of products. By taking 20,000 (mainly young) people to the field, donating 10% of its profits before tax to nature preservation projects, and organising conferences and seminars, Nature et Decouvertes demonstrates the sincerity of its commitment. This has enabled it to build an expanding core of loyal customers who ensure the firm's success.
A recent study carried out by Credoc (Liberation, 30 March 1996, page 21) shows that 54% of French people (compared to 40% three years ago) believe that the humanitarian or ecological commitment of the firm influences their purchasing habits. In the US, Alice Tepper's Marlin's guide, Shopping for a better World which has sold more than a million copies, is similarly a response to this desire of consumers to impart meaning to their actions. By explaining the conditions of a product's manufacture the guide allows consumers to choose the most ethical brands. Surveys show that Americans are prepared to pay 15% more for products that aren't manufactured by political prisoners or children below the age of 15 who are forced to work at night. This has already led a number of large garment manufacturers to close some of their factories. 76% of Americans declare that they are prepared to boycott their favourite brands if they learn that the manufacturer does not respect nature or human rights (survey conducted by the Roper Institute). The author of the guide does not hesitate to add: 'In the 21st century, it will no longer be enough to manufacture products of the highest quality at the lowest price. Shopping also provides one with the means of expressing one's convictions. The consumer, who is now a responsible actor, can contribute to the improvement of life on this planet. It is up to firms to respond to his expectations.'
The company which succeeds in this area thus gains an extraordinary plus: even if it does not have the resources to conduct an advertising campaign, or it is more expensive than its competitors, its sales will not drop (or will drop less than forecast). This constitutes a great 'life insurance'.
To achieve this, it is not necessary for the firm to play a social role. Take the case of Apple. Already in 1984, some analysts were predicting its imminent demise. Even though it has problems, the firm has survived thanks to the support of millions of fans who were prepared to pay 30% more for Apple computers than those sold by IBM. Apple has built its success on the idea that a new view of man and of the world is emerging in society: one which implies an increasing desire for self-development and self-fulfilment. Such a climate furthers sales of Apple computers (which the majority of experts in the '70s believed would never happen) and the widespread use of computers reinforces this desire in society! A self-perpetuating virtuous circle is thus created.
The 'missionary' role of the firm is so important that certain specialists have assured me that Apple salesmen at times overlooked basic sales techniques, so impregnated were they with the philosophy that their job was to contribute towards changing the world and not just sell computers and software products.
Brand communication nurtures this feature as shown in an advertisement in which an 'old-school' company manager visits his company with his grandson and tells him: 'One day all will be yours, so listen to me carefully: Never trust anyone, never delegate; invest in machines and not in training... ' The whole film is in black and white; suddenly it stops and the Apple logo appears in colour while a voice says: 'There are two views of Man. Here's another Apple.' Clearly, what Apple is selling here is not a computer but a vision in which man is a being looking to make sense of his actions, not a machine. This non-reductionist view, according to which man is more than a collection of organs and nature more than a collection of raw materials to be exploited, emerged in California in the '70s, from where Apple's founders came.
Such an approach above all demands authenticity and a long-term commitment on the part of the company. The public is less and less responsive to advertisements such as 'Buy our products and we will contribute to such and such a cause.' The link between the company's activity and its commitment must appear as natural as possible.
The firm must also achieve internal consistency with such a commitment. The company which claims to observe these values, but whose decision-making procedures are hierarchical and linear, whose management practices - no power sharing and whose values are imposed from the top, will have no credibility.
However, firms should also be wary of excesses in the opposite direction: the duplication of certain actions and delays in decision-making as a result of the development of non-hierarchical networks and internal democracy. Their aim should be to let each person assume responsibility for at least a part (albeit minute) of their work and to transform as far as possible 'dumb' jobs. Even a fork-lift truck driver and a switchboard operator should be able to exercise their creativity. This 'liberation of collective intelligence' is all the more important as the creativity of staff is a company's greatest resource. Resources such as capital, raw materials, office space, show rooms etc. are becoming increasingly limited. The difference between companies in the 21st century will be based more on intangible factors such as the ability of managers to create an atmosphere in the firm that spurs employees to greater involvement, rather than passively waiting for their cheque at the end of the month. Here too, authenticity is all important. If the firm adopts this approach with the sole aim of being more productive, without caring about what it can truly contribute to its employees over and above the wages it pays them, it should not be surprised when the employees retaliate against it as they become aware that they are being manipulated.
For instance, a firm like Nature et Decouvertes contributes 13.4% of its wage bill towards training compared to an average 2.4% for French firms as a whole. Its shops do not have salespersons but 'guides', who are passionate about their field: astronomy, biology, geology, zoology, etc., and have received training in this field which enables them to share their passion with the customer. This generates another buying process than that set in train by a salesperson whose sole motivation is not passion but the commission earned on sales.
The problem is, as we will see in our next article, that there are no easy recipes for developing such ideas. They must spring from a will, shared at all levels, to build a common vision and from a conviction that just as we must all breathe to live, even though breathing is not an aim in life, so a firm must make profit to survive, not for short-term gain but in order to survive in the long run. The firm's longevity in the 21st century will result from the development of such a shared vision and social role, and not only from the creation of wealth as put forward by both Marxists and ultra-liberal theorists in the 20th century.
[1] GEMS Business Review 1.227-230,1996.
(9 1996 Kluwer Academic Publishers. Printed in the Netherlands.
Keys to Corporate Success in Contemporary Society
Jean Staune
In the first article of this series we saw:
- how the dominant view of man and the world in society is a key factor in economic organisation.
- that in present-day society, it is science and no longer religion or philosophy that, consciously or unconsciously, determines our view of the world.
- that science was both mechanistic and deterministic in former times (culminating in Taylorism among others) ... and that the 20th century witnessed a 'Copernican' revolution, which had it origins in pure research and is starting to have an impact on our society and business organisation.
We will describe this impact here and identify the factors which can lead to a firm's success.
It should be pointed out at the outset that science exercises an influence on society in two distinct ways: directly, via the effects of the technological progress it generates; and indirectly, by changing our view of the world, which in turn, influences our expectations and behaviour. As the former factor is well known, we will elucidate the latter.
What are the main concepts of today's scientific revolution?
We can identify four:
- that the intangible exists. Some fields of physics and astrophysics reveal that the world cannot be reduced to a calculable, material and objective entity.
- that the search for meaning is meaningful. Studies of the universe and the evolution of life show that the question of the meaning of life lies at the very heart of scientific rationality.
- that thinking is not merely a calculating process. Findings from neurological experiments and mathematical arguments show that man's thoughts cannot be reduced to a calculus as advanced by the so-called 'cognitive' sciences, such as artificial intelligence.
- that self-organisation and non-linear phenomena can be creative. The study of complexity shows that approaches based on reactivity and self-organisation can at times be more creative than those based on linear and deterministic processes.
Just as Pavlov's dogs salivated upon hearing a bell announce its food, so the concept of marketing has for a long time been based on the same stimulus/response mechanism. The argument goes that if you spend more on advertising you sell more, and if you are 5% cheaper than your competitors, you'll sell more. This is verified by experience and easy to explain. The reasoning is purely quantitative and the process deterministic.
This is why, in the 20th century, the 'secrets' of selling taught in business schools have been purely quantitative. But, despite the fact that significant changes have been observed over the last few years, no business school (to my knowledge) has yet reached the point of teaching marketing students how a company can increase sales without advertising and sell products that are 30% more expensive than its competitors! Yet a number of firms have achieved just this feat over the last ten years, both in France and internationally. Their secret lies essentially in generating customer loyalty built on an intangible link between the customer and the company which goes well beyond the phenomenon of the 'brand', and originate instead in a growing desire among customers to give a meaning to their acts of consumption.
Let us take the case of Nature et Découvertes. This chain of shops, similar in concept to The Nature Company, but far more international in outlook, increased its turnover from 61.6 million Francs in 1991 to 296 million Francs in 1996, and opened 29 largely self-financed shops in five years, permitting its founder, François Lemarchand, to remain the majority shareholder. All this was achieved without advertising and with high profit margins.
This achievement resulted from the establishment of another business concept, such as found in other successful firms like the cosmetics manufacturer the Body Shop and Ben and Jerry's home-made ice-cream.
The Nature et Decouvertes catalogue begins with a summary of the company's philosophy and educational role. Without this, the catalogue would be a patchwork of juxtaposed objects: perfume bottles, microscopes, lamps, pocket knives, telescopes, boomerangs, etc.
The guiding concept of Nature et Decouvertes is the rediscovery of nature. The shops, whose soft lighting recreates the light of a forest (where as it is generally considered that strong lighting is essential to attract customers), are located in dense concrete shopping centres (to heighten the contrast), play bird songs (whereas it is said that the tempo of rock stimulates the impulse to buy) and cost 14,000 Francs per square metre, compared to an average of 6,000 Francs per square metre for their neighbours. The concept is not limited to the displaying of products. By taking 20,000 (mainly young) people to the field, donating 10% of its profits before tax to nature preservation projects, and organising conferences and seminars, Nature et Decouvertes demonstrates the sincerity of its commitment. This has enabled it to build an expanding core of loyal customers who ensure the firm's success.
A recent study carried out by Credoc (Liberation, 30 March 1996, page 21) shows that 54% of French people (compared to 40% three years ago) believe that the humanitarian or ecological commitment of the firm influences their purchasing habits. In the US, Alice Tepper's Marlin's guide, Shopping for a better World which has sold more than a million copies, is similarly a response to this desire of consumers to impart meaning to their actions. By explaining the conditions of a product's manufacture the guide allows consumers to choose the most ethical brands. Surveys show that Americans are prepared to pay 15% more for products that aren't manufactured by political prisoners or children below the age of 15 who are forced to work at night. This has already led a number of large garment manufacturers to close some of their factories. 76% of Americans declare that they are prepared to boycott their favourite brands if they learn that the manufacturer does not respect nature or human rights (survey conducted by the Roper Institute). The author of the guide does not hesitate to add: 'In the 21st century, it will no longer be enough to manufacture products of the highest quality at the lowest price. Shopping also provides one with the means of expressing one's convictions. The consumer, who is now a responsible actor, can contribute to the improvement of life on this planet. It is up to firms to respond to his expectations.'
The company which succeeds in this area thus gains an extraordinary plus: even if it does not have the resources to conduct an advertising campaign, or it is more expensive than its competitors, its sales will not drop (or will drop less than forecast). This constitutes a great 'life insurance'.
To achieve this, it is not necessary for the firm to play a social role. Take the case of Apple. Already in 1984, some analysts were predicting its imminent demise. Even though it has problems, the firm has survived thanks to the support of millions of fans who were prepared to pay 30% more for Apple computers than those sold by IBM. Apple has built its success on the idea that a new view of man and of the world is emerging in society: one which implies an increasing desire for self-development and self-fulfilment. Such a climate furthers sales of Apple computers (which the majority of experts in the '70s believed would never happen) and the widespread use of computers reinforces this desire in society! A self-perpetuating virtuous circle is thus created.
The 'missionary' role of the firm is so important that certain specialists have assured me that Apple salesmen at times overlooked basic sales techniques, so impregnated were they with the philosophy that their job was to contribute towards changing the world and not just sell computers and software products.
Brand communication nurtures this feature as shown in an advertisement in which an 'old-school' company manager visits his company with his grandson and tells him: 'One day all will be yours, so listen to me carefully: Never trust anyone, never delegate; invest in machines and not in training... ' The whole film is in black and white; suddenly it stops and the Apple logo appears in colour while a voice says: 'There are two views of Man. Here's another Apple.' Clearly, what Apple is selling here is not a computer but a vision in which man is a being looking to make sense of his actions, not a machine. This non-reductionist view, according to which man is more than a collection of organs and nature more than a collection of raw materials to be exploited, emerged in California in the '70s, from where Apple's founders came.
Such an approach above all demands authenticity and a long-term commitment on the part of the company. The public is less and less responsive to advertisements such as 'Buy our products and we will contribute to such and such a cause.' The link between the company's activity and its commitment must appear as natural as possible.
The firm must also achieve internal consistency with such a commitment. The company which claims to observe these values, but whose decision-making procedures are hierarchical and linear, whose management practices - no power sharing and whose values are imposed from the top, will have no credibility.
However, firms should also be wary of excesses in the opposite direction: the duplication of certain actions and delays in decision-making as a result of the development of non-hierarchical networks and internal democracy. Their aim should be to let each person assume responsibility for at least a part (albeit minute) of their work and to transform as far as possible 'dumb' jobs. Even a fork-lift truck driver and a switchboard operator should be able to exercise their creativity. This 'liberation of collective intelligence' is all the more important as the creativity of staff is a company's greatest resource. Resources such as capital, raw materials, office space, show rooms etc. are becoming increasingly limited. The difference between companies in the 21st century will be based more on intangible factors such as the ability of managers to create an atmosphere in the firm that spurs employees to greater involvement, rather than passively waiting for their cheque at the end of the month. Here too, authenticity is all important. If the firm adopts this approach with the sole aim of being more productive, without caring about what it can truly contribute to its employees over and above the wages it pays them, it should not be surprised when the employees retaliate against it as they become aware that they are being manipulated.
For instance, a firm like Nature et Decouvertes contributes 13.4% of its wage bill towards training compared to an average 2.4% for French firms as a whole. Its shops do not have salespersons but 'guides', who are passionate about their field: astronomy, biology, geology, zoology, etc., and have received training in this field which enables them to share their passion with the customer. This generates another buying process than that set in train by a salesperson whose sole motivation is not passion but the commission earned on sales.
The problem is, as we will see in our next article, that there are no easy recipes for developing such ideas. They must spring from a will, shared at all levels, to build a common vision and from a conviction that just as we must all breathe to live, even though breathing is not an aim in life, so a firm must make profit to survive, not for short-term gain but in order to survive in the long run. The firm's longevity in the 21st century will result from the development of such a shared vision and social role, and not only from the creation of wealth as put forward by both Marxists and ultra-liberal theorists in the 20th century.
[1] GEMS Business Review 1.227-230,1996.
(9 1996 Kluwer Academic Publishers. Printed in the Netherlands.