On Purpose

by Shaun Smith

  to refresh the world in mind, body and spirit;

  to inspire moments of optimism and happiness through our brands and actions;

  to create value and make a difference.

  IKEA

  IKEA is a great example of a business that never stands still. Possessed of a purpose, which is the democratization of design, it constantly develops and extends itself. In 2015, IKEA was voted by Fast Company to be one of the most innovative companies. But it is not so much innovative as relentless. The design ranges that they produce are not so distinctively different every year – they look like what they are: affordable Swedish design. Their business model is essentially ‘volume selling’. They make huge quantities of the same stuff, which means they can achieve good prices from suppliers. And then they sell huge quantities of the same stuff at low prices. One of their most iconic products, the Billy bookcase, is sold every 10 seconds! And they sell it in the same way everywhere. Their retail stores don’t change noticeably from year to year or from market to market; they remain largely unattractive big blue warehouses where customers are route-marched through IKEA’s chosen path. But they are relentless in rolling them out because more stores mean more volume, which means they can continue to keep prices low; in 2014, IKEA cut prices for its products around the world by an average of 1 per cent. What really marks them out is the commitment not so much to innovation as to growth of a consistent format globally and the continuous updating and reinvention of parts of the experience in order to keep the brand relevant.

  In 2014, 821 million customers visited IKEA’s 361 stores worldwide. Conscious of and responsive to customers’ changing habits and, especially, what customers are and are not prepared to tolerate, IKEA has addressed those parts of the customer experience that customers find to be a ‘pain’. One of the pleasure points of the IKEA experience is the way they beautifully lay out showcase rooms in the store. Conversely, the ‘pain’ is the worry of what the furniture will actually look like when you get it home. So they have invested in a ‘catalogue app’ through which you can choose a piece of furniture, point your smartphone at the area of your home that it is intended for and get a 3-D image of it in that space. Since families often have to traipse around the IKEA stores together, as they are often warehouses that you need to drive to, IKEA have introduced a family card, which as well as offering discounts also entitles you to an extra 30 minutes of complimentary babysitting at the supervised play centre. Fast Company reported that IKEA’s family memberships had jumped from 4.3 million to 6.9 million within one year.

  Of course they continue to invest in product developments (with some products now assembled with just four screws) and keeping up with trends by offering affordable Swedish-designed standing tables. But, as we say, none of these are ‘innovations’; they are rather a manifestation of the relentless desire to improve the complete customer experience in line with IKEA’s purpose.

  That sense of purpose and the values associated with it are reflected in the way they treat their employees. As Fast Company reported:

  ‘In 2014, IKEA’s US arm invested in another part of the in-store experience – its people. It now uses the MIT living wage calculator, not local requirements, to determine the hourly rate for each particular market. As a result, 33 of the 40 US stores increased their wages on 1 January (five stores already offered pay above the living wage) and 50 per cent of its US retail workforce will see a pay bump in 2015.

  ‘Happier employees mean happier customers.’

  IKEA’s growth plan is for €50 billion in sales by 2020 in 500 stores worldwide. They will grow because their core target audience, middle-class consumers with ‘thin wallets’ (a company expression), will grow worldwide. IKEA cannot afford to stop growing.

  This need for growth is echoed in the words of Ove Arup, the founder of the global architectural and engineering firm that bears his name. Speaking in 1970 to a conference of the firm’s senior managers, Arup explained the importance to the business of its sense of purpose. He talked of ‘total architecture’, in which all elements of design and environment must be considered, in the pursuit of quality. Arup’s speech is still used today in the company to induct all employees into an understanding of the raison d’être and values of the business:

  ‘We are then led to the ideal of “total architecture”, in collaboration with other like-minded firms or, better still, on our own. This means expanding our field of activity into adjoining fields: architecture, planning, ground engineering, environmental engineering, computer programming etc, and the planning and organization of the work on site.’

  It is a sentiment shared by another Swede, IKEA Group CEO Peter Agnefjäl: ‘We’re guided by a vision to create a better everyday life for many people. That is what steers us, motivates us – that is our role,’ he says. ‘We feel almost obliged to grow.’

  Being committed to your purpose obliges you to grow because growth is in pursuit of that purpose. As Robert Stephens pointed out, purpose does not have to be altruistic. Growth and profit are laudable aims, providing that organizations are authentic in their ambitions and don’t say one thing and then do another. Growth can only ever be on the back of creating value for customers and if providing it is not at the expense of your people, suppliers or society at large.

  One brand that has been relentless in pursuing purpose and in driving itself to new levels is Nissan.

  Nissan

  Lucas Ordóñez loves racing cars. He loves the excitement, the thrills – that adrenaline rush as his car screeches past the next by a hair’s breadth. For Lucas, however, the action all happened on screen. Lucas was an online gamer – and a very talented one, but his only experience of racing had been restricted to his Sony PlayStation. That is, until Nissan stepped in with the GT Academy.

  The GT Academy (a partnership with Nissan Nismo and Sony PlayStation) took gamers who liked playing racing-car games on their consoles through a series of competitions. For the winners, it gave them the opportunity first to drive a real racing car and ultimately to compete in a real race. Lucas Ordóñez was one of them and went on to become a highly successful racing driver.

  From sitting on his sofa with his PlayStation to standing on a podium at Le Mans: it is a story that dramatizes the very essence of Nissan’s purpose – making innovation and excitement accessible to everyone.

  From bland to extraordinary…

  In 1999, the Nissan company was on its knees and the brand was little loved. Carlos Ghosn transformed the fortunes of the business with a number of bold moves, including a life-saving alliance with Renault. Such was his transformation of the business that his heroics were captured in the Japanese Manga comic book Big Comic Superior, a seven-part series featuring Carlos Ghosn as the true superhero of his time. He even has the honour of having a Japanese Bento Box named after him.

  Having saved the company and returned it to financial health, Ghosn’s next priority has been to build Nissan into a brand that is globally recognized for innovation and excitement. Saving a company is one thing, building a global brand is quite another. One requires urgent action and a sense of survival; the other requires long-term sustainability and a sense of purpose.

  Nissan’s purpose is probably best seen in two bold moves. The first was the invention in 2007 of the ‘crossover’, a car that combined the best of two types of vehicles. The first ‘crossover’ was the Nissan Qashqai, which combined the roominess of a SUV with the compactness of a hatchback. The Nissan Qashqai won numerous awards but above all won the hearts and minds of a whole new group of customers. As of 2015 more than 2 million Nissan Qashqais have been sold across Europe and the latest version launched in 2014 was voted Car of the Year.

  Image 9.1 Nissan’s crossover range

  The second bold move was to pin its future to electric vehicles (EV). Its major investment in and long-term commitment to the technology and the infrastructure required to make EV
the future of automotive driving will take many years to yield a financial return. It is, however, already yielding significant returns in the perception of Nissan as a brand; its first EV, the Leaf, won the coveted International Car of the Year award and Nissan already is the leader in EV sales.

  Europe has been one of the most important markets for Nissan. Steve McLennan, who is the general manager of Brand Power at Nissan Europe, explains how the importance of a bold purpose drives a relentlessness to deliver for consumers and customers.

  We were struggling as a brand and a business, because we didn’t own a clear sense of a purpose towards the customer. In the late 1990s, we were providing cars that were by and large ‘me-too’, into quite traditional and highly competitive segments of the market. They were worthy products, but didn’t really bring anything new to the consumer.

  Then Carlos Ghosn arrived as CEO. He recognized that if he was to turn the business around, we couldn’t take a me-too approach. His real challenge was how to appeal to mainstream segments by doing something different. That challenge was answered through customer insight, which led to a new product concept. The insight was this: the attractiveness of SUVs for customers was at a tipping point. Consumers loved sports utility vehicles for the practicality and the size that these vehicles offered, but mainstream customers didn’t like the running costs, the high fuel inefficiency, and the high levels of CO2.

  So the crossover was born out of a very simple equation, which was to offer the strength, the imagery and the practicality of a sports utility vehicle but, through clever engineering and design, to combine that with the agility and the running costs of a traditional hatchback. That should excite consumers to step outside their traditional choices and take on board a new concept.

  The crossover concept really transformed Nissan in Europe, and beyond as well. What we learned from that was the value of confidence within an organization. From that moment, Nissan started to develop a clearer sense of purpose in making innovation and excitement accessible to everyone. We became more adventurous. We started looking at some of the bigger societal trends, longer-term trends, and answering those with different concepts as well.

  A great example, of course, is fossil fuels. It didn’t take a rocket scientist to work out that fossil fuels were not the future for the automotive industry.

  Carlos Ghosn committed and challenged the organization to substantial investment in developing battery technology, and Nissan was first to market with a mainstream EV car for the road, the Nissan Leaf. But without that original sense of purpose with crossover, I don’t know if we would have had the boldness for EVs. So I think it’s really, really important that once you gain that sense of purpose, once you develop confidence within the organization, the organization becomes braver, more challenging and stretches its thinking. It needs to look further into the future, and really drill down as to what the main societal issues are going to be, and try to respond.

  The impact of cars in mature societies is quite obvious. First, there is congestion. And, then there’s safety. We are developing technologies that can answer that societal benefit of minimizing accidents, and zero fatalities.

  These are what we call autonomous driving technologies. These are technologies that proactively inform, warn and protect the driver from any imminent dangers that he or she might not have noticed. There are some standard technologies that are already going onto cars, such as blind-spot warning, lane departure warning and reversing cameras. Nissan have been first to market those for the mainstream. But we have even bigger plans, cars that can park themselves, drive themselves and interact with other cars – and, indeed, infrastructure to improve the whole driving experience. In the UK alone, five cities have been designated as autonomous driving pilots. Nissan will continue to drive that forward.

  The other societal trend that autonomous drive can answer is the ageing population. We think the autonomous drive technology, when it is fully delivered, will mean that consumers will be able to drive into their later years. And that has to be a benefit for society.

  Nissan are relentless in their approach to the market, bringing to the mainstream driver ideas that will excite and enhance the driving experience; thinking of the future and turning that into solutions for now. However, to have the confidence of a sense of purpose, as Steve McLennan discusses, you also need to have the organization fully aligned behind the brand. Of the many things that Nissan has done to deliver its purpose, perhaps the most important has been to put the brand at the centre of its business.

  Paul Willcox is the chairman of Nissan Europe. He is ultimately responsible for everything that affects the customer’s experience of Nissan; from the research and development (R&D) centres and the manufacturing plants to the sales and marketing businesses in each country. He explains the bold moves he oversaw at Nissan to put the brand and its customer-driven purpose at the heart of the organization.

  Nissan is a great company that has built first-class products, but in the past we didn’t have a clear enough focus on what our brand should stand for. So for me the most important thing to do was to get the organization aligned to a common purpose, a common understanding of what Nissan stands for, and to put the customer first and foremost at the front of our decision making.

  That means having much more precision in everything we do, in terms of the product, the services that we provide with the product, or through our dealer network, and the way we communicate and consistently deliver through the organization.

  With a global company like Nissan that’s not easy. Even within the region I’m responsible for, we operate through 35 different countries, offering more than 20 products, and if you take the broader organization beyond just our direct employees and include the dealer networks, you’re probably talking 40,000 people. So to get that kind of direction is difficult but it’s critical in terms of driving commercial performance. When we have a common direction then we’re much more efficient and effective in driving demand. It’s actually as simple as that.

  So, I took the decision to take the brand out of marketing, and made it a cross-functional responsibility of the senior vice presidents, vice presidents and general managers of each of our different entities. So people in different parts of the organization couldn’t think that it was not their responsibility, that it was someone else’s responsibility. Because whether you work in Finance, Customer Support, Sales, Marketing or in Engineering, everyone has a role to play. The easy route is to say, ‘Oh, let’s put the responsibility into a very narrow focus of marketing,’ but I think that is completely wrong. For sustainable overall performance, everyone has to align to a common brand purpose, and as I said before, it doesn’t matter where you work. Everyone needs to understand their role and their responsibility in delivering that.

  I think many companies make the mistake of assuming brand development is purely a function of marketing communications, that good advertising is the way to build up a brand. From my perspective, that’s nonsense. Obviously it’s very important that you get the communication correct, but without content, without consistency, without consistent delivery to the customer in everything you do, then the promise is fake. It’s a vacuous promise.

  We are building our brand on the key drivers that influence purchase decisions, and we took a very clear view, based on customer feedback, that there are basically two things we need to achieve. One is to build trust. It’s very clear, through any consumer research, that if you don’t build trust then no matter what else you do it’s of limited value.

  The other is that I want all functions within the European organization to align to deliver the highest levels of quality – not aiming for top quartile, aiming for number one – and the measure there is the consumer perception of quality: do consumers perceive that Nissan is a quality brand? So we set that as a foundation. Of course, all our competitors will want to have very strong quality, so we also need to differentiate ourselves. Diffe
rentiation for us means delivering accessible innovation through technology leadership. And we have three very clear dimensions as far as technology goes: EV leadership, crossover leadership (which we have in Europe) and autonomous driving.

  I have two main responsibilities to help deliver alignment to the brand. The first is to support the central Brand Power team; this is outside any function. It effectively sits at the centre reporting through a function directly to me. It is a small, dedicated group whose sole task is to ensure that throughout the business we have the understanding and the traction to drive the actions that are required in the business.

  The second is to be conscious as the chair of the management team in Europe, always to think about first and foremost the customer. So to make sure that all of our executives understand our products, how they compare in the competitive sense, and how they stand against the brand filter.

  What I have found interesting is that not everybody finds it easy to align to this because this is very difficult. It’s so easy when you have a task-orientated role where someone says, ‘You go and do these three things; come back tomorrow and tell me how you’ve done and I’ll give you the next three tasks.’ When you start talking about ‘How do you shape the attitudes of customers towards your brand? How do you go away and shape people?’– then that is much more challenging for people and some people struggle with it. Manufacturing is a control process; you put control measures in, and you get an output that is expected. Brand is not as simple as that, because you’ve got an unknown quantity, which is called a consumer.