Senior business leaders are paid big bucks to make the toughest decisions.
Should we launch product x or y?
Should we focus investment in the east or west?
Should we work with this partner or that one?
But where does the conviction come from to make these million and billion dollar decisions? From a business case? Being in the data business myself, I’m fully aware of the perils of data and how it can be used and abused in a business case to sell any argument, even completely opposing arguments.
Let’s acquire that company as it is 80% incremental to our business.
Let’s pass on that company as we would be paying a 7x multiple, much more than it’s really worth.
Can you relate to being in an organization where decision-making seems to happen with a coin flip?
Sadly, I have seen a lot of seemingly arbitrary decision-making by companies. And when this happens, when marketing decisions and strategies are developed and reversed as management teams come and go, it signals one thing to me. There is no conviction in the decision-making.
So where does decision-making conviction come from? I’d like to make the case it comes from:
- Knowing what business you are in from a consumer lens, and
- Having an aligned view of the future of your industry
If a company’s leadership team can answer these two questions in relative unison, sign me up to buy their stock.
Here’s a good example. CVS is a retail pharmacy chain in the U.S.A. They decided their brand purpose was to ‘help people on their path to better health.’ Their leadership team saw a future where wellness is in dire need, and a world where brands need to be authentic and act on their brand purpose. In keeping with this focused mindset, in 2014, the CVS team declared they would no longer sell tobacco. This strategic decision essentially forfeited $2 billion in annual sales. Brand growth or brand death?
A strategic business case based on carefully curated data could have argued for any range of decisions. CVS could have put forth a case that dropping the tobacco business would be beneficial because companies would consequently switch to them for their corporate health plans. Conversely, the data could have easily been prepared to argue in favour of keeping the $2 billion in sales.
However, through a clear view of what business they were in and an aligned view of what the future holds for their company and their industry, there really was one better answer. They made a strategic business decision with conviction and opted to act on their brand purpose and ‘help people on their path to better health.’ In 2015, CVS proudly shared data showing that their decision had a positive impact on the health of consumers.
Most recently, PepsiCo paid $3.2B for Soda stream and Constellation Brands, a Fortune 500 producer and marketer of beer, wine and spirits, invested $5B into a Cannabis company. Brand growth or brand death?
Are these desperate corporate moves in a landscape of disruption? Or instead, are these companies displaying a clear understanding of their brand purpose and an aligned view of the future. Time will tell.