• Nathan Hansen

What is Impact Strategy? | It's the next big differentiator in marketing for Industry 4.0.

Let’s start with what impact strategy is NOT. It’s not always about ending global warming or increasing environmental stewardship. It’s not always about stopping pollution or feeding the hungry. Nor is it just about saving the whales, the trees or the honey bees. It can be ANY of those things, MANY of those things or NONE of those things at all. A company's “Impact” really comes down to “what’s in the eye of their stakeholder”. A "stakeholder" is a person or a party that has an interest in a company that can either

affect or be affected by the business.

Say, for instance, that you’re the director of the World Wildlife Fund. Your patrons probably care a lot about protecting endangered animals and so you wouldn’t want to host a hunting trip to the Serengeti. On the other hand, if you’re the director of the NRA, that is exactly what you might do. Both organizations have patrons with very different concerns that dictate whakind of impact they will want to have. True, in our world today, “impact” is typically associated with sustainability or corporate social responsibility, but it can also be anything from gun rights to the expansion of a certain religious philosophy.

These two examples are both very obvious but not all situations are as apparent as these. Take Starbucks for example. Starbucks is a global company with many different customers from all walks of life that frequent their establishments. Back in 2004, they were accused of refusing to donate coffee to American troops because they were thought to oppose the Iraq war. Whether or not these allegations were true or not, it gave many of their patrons the perception that Starbucks did not support the troops. Starbucks even responded by committing to hire thousands of veterans and their spouses over the next several years. Unfortunately, much of the damage had already been done and it tarnished their reputation in the veteran community, regardless of the steps taken to negate the accusation.

Before 2014, Starbucks was just a place where someone could get a really good cup of coffee. After the 2004 fiasco, Starbucks had pretty much been branded as a “far left leaning,” politically involved organization whether they liked it or not. That’s not always a good thing when you’re a coffee company that has people from both sides of the political void that love coffee. Even though those days are pretty much behind them, it still prompted the birth of companies like Black Rifle Coffee who give a certain percentage of their profits to veteran organizations like, The Wounded Warrior Project. By committing to hire veterans, Starbucks was implementing an “impact strategy.” Veterans have nothing to do with good quality coffee yet they still deem it necessary to go beyond a simple cup of coffee to support their troops because that’s what many of their patrons consider important.

Impact strategy is all about going beyond a simple product or service and finding out who your customers are and delivering what matters most to them. It’s about elevating your brand to the point of being a prominent member of a society by delivering as much customer satisfaction as possible while still being financially realistic. In the end, it’s all about creating brand loyalty to the point of being a critical aspect of your customer’s lives. You have to ask questions like:

Is impact strategy a new concept?

Not exactly. It’s no more novel than the common desire to be acknowledged for a good deed. That’s almost as human as eating, sleeping or breathing. It’s that act of reciprocity that we all take part in every day of our lives. Impact strategy just introduces it to the business world. You could even call it philanthropy as a marketing strategy. Even though the concept of impact strategy is not new, it hasn’t been a major factor until now. Let’s talk a little about how business has progressed to this point and how impact strategy will take center-stage in the new industrial revolution.

History of industrial revolutions

The greatest periods in the advancement of industrialization have been over the past several hundred years and can be narrowed down to three main eras:

The mechanical revolution was the first real industrial revolution and it began in the mid-1700s with the invention of the steam engine. The steam engine made mass transportation and shipping possible through the creation of the train locomotive. It started a shift from agriculture to industry as the foundation of our social economic structure. During this period, we started to see factories popping up, cities forming and an acceleration of exchange of goods and services.

The next industrial revolution was the chemical revolution around the late 1800s. This period saw the development of many different kinds of synthetic fabrics, dyes, solvents, fuels, fertilizers and all kinds of new materials with varying uses. We also started to see advancements in communication via the telegraph and the telephone as well as advancements in transportation like the automobile and passenger airplanes.

The third revolution was the digital revolution. This began around the middle of the 20th century with the invention of the computer. The computer changed so much about the way we lived and worked. Computer programs and robotics began replacing the human element if the process was programmable. We also started to see nuclear energy on the rise, space exploration and biotechnology.

Since the dawn of the first industrial revolution, we have been pursuing a more comfortable lifestyle in ways that have been unprecedented throughout human history and we call it “progress.” We worked, toiled and slaved to amass wealth and great fortunes by giving people exactly what they wanted… stuff. However, during the third industrial revolution there was a sort-of “peak” that many first-world cultures hit. It could be described as “sensory overload.”

We had everything we could ever want, more information than we could ever consume and less “real need” than we could ever imagine. Yet still, depression and anxiety were on the rise and it continues to grow in severity by leaps and bounds. According to a report released by the National Center for Health Statistics (NCHS), the rate of antidepressant use in this country among teens and adults (people ages 12 and older) increased by almost 400% between 1988–1994 and in 2005–2008. (Harvard)

This has left many of the younger generations asking, “What’s it all for and to what end?” It has led to many new trends in lifestyle changes like; minimalism, mindfulness, quality of life, localization, work/life balance and the list goes on. It focuses on more than just “stuff”. It goes into the idea that there is more to life than what a person can accumulate. At this point, our ability to shape our surroundings to fit our every desire has afforded us this newfound awareness and it is having a profound effect on the next generation and how they shape the next industrial revolution, Industry 4.0.

What is Industry 4.0?

Industry 4.0 will do the same thing that all other industrial revolutions did. It'll be built on the back of the previous revolution. The digital revolution gave us the internet, wireless connectivity and the ability to automate processes. It is moving industry to more of an automated process and focusing more on our everyday lives more meaningful. It will make waking up a breeze because your alarm clock will only turn off when its sensors can tell that you are standing up. Once you’re standing up, your alarm clock will tell your water heater to start warming up, turn on the shower and start the coffee pot.

It is bringing business back to local communities rather than having gigantic factories in far-off places that have to ship goods halfway around the world. With the advancement of technology combined with Moore’s Law, the kind of manufacturing that used to only

be possible with vast amounts of capital are being afforded right in people’s backyards. Manufacturing in Industry 4.0 will be no more than a 3D printer in your garage. The only thing you’ll have to buy is a printer cartridge and a digital blueprint delivered via the internet. We will have transformed everyday products into commodities much like we did with rice, wheat and pork bellies.

Where will impact strategy matter most?

What do you compete on when there is nothing left to compete on. In the study of economics, there is a theory known as “perfect competition”. Perfect (or pure) competition is a theoretical market structure in which the following criteria are met:

  1. All firms sell an identical product (the product is a "commodity" or "homogeneous").

  2. All firms are price takers (they cannot influence the market price of their product).

  3. Market share has no influence on prices.

This is essentially the outcome of all competition. At some point, a plateau of efficiency is met and there is no differentiation. This is happening already with everyday products from; pens and paper, to toothpaste and toothpicks. At some point there is nothing novel about a product that’s as abundant as a grain of rice.

However, what HAS become a differentiator is how a purchase makes a person feel. Throughout the last three industrial revolutions, our goal has been to make things better, faster, cheaper and stronger. We’ve done that. Now people want to know how we will continue to make it without harming the they care most about. This does not spell the end of industry or business. It simply changes what a product is. A product in the future will be all about the service it provides rather than its mere function. The term “product as a service” will take on a whole new meaning. A toothbrush might serve you to brush your teeth but it will also make you feel good because the company that made it will send another toothbrush just like it to a poor kid in an underdeveloped country who cannot afford one. At that point, the toothbrush almost becomes secondary to the positive emotions the person experiences. We will be competing on “impact”. It’ll be the only differentiation left to compete on.

Tying it all back

So what is business exactly? It’s merely an exchange of value. If I build houses and you raise beef, at some point you will want a home and I'll want a steak. Then we'll seek each other out and make an exchange based on what we see as an equal transfer of value. For the past few thousand years we have been honing and perfecting this process to the point where we are today. Throughout this time, humanity has had bursts of innovation in science, technology, the arts, industry and the like. What we’ve begun to realize is that many of these things rest upon the back of a finite world of resources that lead us to a future much like the ones of the people of Easter Island.

Have you ever heard of the ancient people of Easter Island? They were a tribal society in the South Pacific somewhere off the coast of Chile. The island and its nearly 3,000 inhabitants were discovered on Easter Sunday in 1722 by a Dutch explorer named, Jacob Roggeveen. When James Cook arrived nearly 50 years later, in 1770, he reported that only approximately 600 inhabitants remained. Their decimation seemed to be a result of civil war, disease and deforestation. Their natural resources had been depleted to almost nothing except their own cultivated vegetation. The fate of Easter Island is a story told by impact strategists world-wide to express the importance of why sustainability is so important in our age of over-consumption.

We look upon the people of Easter Island as a primitive society yet we behave in much the same ways. In today’s world we have:

  • A current extinction rate 1,000 times higher than natural background rates of extinction and future rates are likely to be 10,000 times higher. (Wiley)

  • More than 75% of Earth’s land areas are substantially degraded. (NatGeo)

  • The average American adult consumes between 126 and 142 tiny particles of plastic every day, and inhales another 132-170 plastic bits daily. (UVic)

  • Discovery of human waste remains everywhere from Mount Everest to Marianas Trench to the outer reaches of our atmosphere.

These stats are not meant to make you feel bad or to shame you into leading a more sustainable lifestyle. I’m merely stating them to illustrate the momentum of concern that has been snowballing behind years of data collection and analysis of natural resource depletion and abuse. However, as the saying goes, “If it wasn’t meant to happen, it wouldn’t be happening.” Everything that has happened up until this point has happened exactly as it was meant to. If it wasn’t for our ability to innovate and create, we wouldn’t have the abundance of tools we have today to better combat our greatest enemy… ourselves.

Impact strategy will be critical in Industry 4.0

The reality is, impact strategy is most often associated with sustainability because that's what many people today have decided is important to them. Impact isn’t really anything new to business. It’s simply a new element in what consumers want beyond just a quality product that is readily accessible, reasonably attractive and at a fair price. In the future, impact strategy won’t just be a good marketing campaign, it’ll be a necessity. Today, it’s a fresh new way to differentiate yourself from your competition and carve out a whole new niche in your market.