Generation Purpose

GENERATION P(URPOSE) FROM FIDELITY TO FUTURE VALUE ACHIEVE COMPETITIVE AGILITY

Generations Y and Z are making their move. Now representing About the authors 1 nearly two-thirds of the world’s population, their influence and Rachel Barton spending power is huge. Their preferences and expectations will Senior Managing Director, Accenture Strategy dominate for decades to come. Executives must stand up and take Rachel leads the Accenture Strategy Customer Insight & Growth notice. Generation Y and Z consumers aren’t like earlier generations: Strategy practice in Europe, Latin America and the United Kingdom. Working with some of the world’s largest companies, she advises They place greater importance on a company’s purpose and are more business leaders across multiple industries on how they can acquire likely to vocalize their opinions and turn their backs on companies and retain profitable customers to grow their market share. Rachel is based in London. that falter.2 Generations Y and Z have ascended to Generation P(urpose). Jürgen Morath In response, companies should step up How should companies react? Managing Director, Accenture Strategy their purpose game. Simply having purpose By bringing clarity to what they value Jürgen leads the Accenture Strategy Customer Insight & Growth Strategy isn’t enough for the Generation P(urpose) and believe in. By attracting consumers practice in Austria, Switzerland, Germany and Russia. He leads organizational growth strategies across a variety of industries and provides crowd. They demand that companies infuse not just by the strengths of their brands specialized expertise to the C-suite on how to leverage technologies purpose across their organizations, via but by the strength and fidelity of their to accelerate customer benefits. Jürgen is based in Kronberg. all touch points, and through their words, actions. And by applying a purpose-led Kevin Quiring actions, products, services and ways mindset to drive innovation to all parts Managing Director, Accenture Strategy of doing business. of their organizations and to achieve Kevin leads the Accenture Strategy Customer Insight & Growth Strategy Generation P(urpose) demands fidelity. sustained competitiveness. practice in North America. He advises organizations across a variety of industries in the design and development of customer strategies, and leads initiatives focused on driving profitable growth through customer acquisition, development and retention. Kevin is based in Minneapolis. Bill Theofilou Senior Managing Director, Accenture Strategy Bill leads the Accenture Strategy Customer Insight & Growth Strategy practice. He leads strategy and implementation engagements across a range of industries, specializing in restructuring companies for profitable growth, developing new go-to-market models and growth strategies, and aligning organizational and cost structures. Bill is based in Boston. 2 | GENERATION P(URPOSE)

4.8 billion reasons to get purpose right Consumers’ expectations around experience continue to be at an all-time high. But those have become table stakes. As Accenture Strategy found in its watershed 2018 report, From me to we: The rise of the purpose-led brand, a company’s purpose, or lack of one, is an important driver of consumer behavior—and revenue. Purpose, which influences many consumers’ decisions to switch or keep spending with current brands, puts an estimated US$5 trillion of revenue potential at play globally.3 That’s an opportunity—and risk—too great for companies to ignore. Certain consumer segments are more prone disappointed them due to its words or actions on a Globally, up to a quarter to be influenced by purpose. Our 2019 Global social issue. A third of them will pay more to companies Consumer Pulse Research revealed that Generations that stand for issues they care about or clearly articulate of consumer spending is Y and Z, which make up nearly 5 billion of the world’s core values that align with their own. While this population, have a more acute understanding of represents a relatively small percentage of consumers, influenced by purpose. authenticity of purpose—and of the power they it’s larger than the 18% of other generations willing to An estimated US$5 trillion possess—than all other generations. We call this pay a premium for purpose. generation: Generation P(urpose). risk or opportunity hangs And while the overall wealth of Gens Y and Z is 3 Nearly three quarters (74%) of Gens Y and Z consumers significantly smaller than previous generations, it’s in the balance. want companies to take a stand on issues close to their important to note that what they currently lack in wealth, hearts, compared to 59% of other consumers. they make up in influence. One study found that 87% of More importantly, Gens Y and Z put their money Generation Z parents say their children influence their where their purpose is. More than 50% of Gen Y and purchasing decisions.4 And then there’s the estimated Z consumers, compared to 37% of other consumers, $68 trillion Generation Y will be inheriting from their Baby say they have shifted a portion of their spend away Boomer parents by 2030.5 The values and power of these from their current service provider when a company generations should not be underestimated. 3 | GENERATION P(URPOSE)

Live out loud with fidelity of purpose Companies can only compete on purpose when purpose permeates the organization. It must be present and identifiable in every product, service, action or word. In building fidelity of purpose, companies make their commitments tangible. It also positively impacts their growth and profitability. Those companies that demonstrate purpose have been 6 shown to outperform the market by 5%–7% per year. Communicating and living one’s purpose are Fidelity of purpose two different things. The recent backlash against well-known tech players over issues of political is the manner in which advertising, privacy protections and treatment a company manifests of workers confirms that consumers judge companies on a host of factors—anywhere from the transparency its core essence in all of their operations to their use of plastics. it does and proves its Gen Y and Z consumers are more keenly sensitive purpose is real every day. to these factors than other consumers (see Figure 1). Companies that look at purpose holistically and build fidelity authentically, in multiple ways, are more likely to attract Gen Y and Z advocates for the long run. 4 | GENERATION P(URPOSE)

Gens Y and Z demand fidelity of purpose more than all other generations Figure 1: % of consumers who believe these fidelity factors make doing business with companies that exhibit them more relevant and attractive FIDELITY FACTORS (a select list) Consumers ages 18-39 Consumers ages 40+ Sourcing services and materials in highly ethical ways 63% 58% Supporting and acting upon societal and cultural causes I believe in 57% 45% Providing credible “green” credentials, minimizing harm on environment, investing in sustainability 53% 46% Proactively sharing information about how they do business 49% 41% Having leaders that proactively take stands on issues 48% 39% Making me feel part of something bigger and connecting people around common causes or beliefs 46% 34% Regularly reporting on actions to deliver against their promises 46% 38% Taking political stances on issues 45% 32% 5 | GENERATION P(URPOSE)

Beware the industry impunity illusion It would seem that some industries have a bigger purpose hill to climb, but the reality is that some industries have a lot directly at stake and some have a lot indirectly at stake. All industries, however, have significant skin in the purpose game. Consider direct-to-consumer industries in which What consumers lack in power of choice, they make consumers have abundance of choice. Industries up for in power of voice. Who listens to their voice? such as consumer goods are typically fastest to Weighty and influential stakeholder groups like experience the financial impact of purpose-driven regulators and investors, the latter of which has consumer sentiment. A company has a preventable decidedly taken a front seat at the purpose table. misstep, consumers take to social media, some A recent article reported that a growth of sustainable consumers switch, and the company pays the price. funds and socially responsible investors is lifting share prices for U.S. water utilities as investors seek to inject On the other hand, direct-to-consumer industries 7 more money into socially responsible companies. in which consumers have little to no choice, such as But what the purpose-led investor community giveth, utilities, might feel like they have less at stake with the purpose-led investor community can taketh away. regard to purpose primarily due to consumers’ inability to switch. But the court of public opinion has more power than ever, so this is less and less the case. 6 | GENERATION P(URPOSE)

Innovate your way to fidelity One of the most important ways companies can prove their authenticity is through purpose- led innovation. Many think about innovation in terms of R&D initiatives and the introduction of new products and services. But innovation should be applied in a number of other ways to demonstrate a company’s commitment to purpose. Each of the fidelity factors presented in Figure 1, as well as many others, can be made real with purpose-led innovation. Consider environmental sustainability, a cause that It is a process of co creativity which promotes Customers now need to bring their own reusable more than half of Gen Y and Z embrace. Industries that value that will be shared in the long term.”9 cups—or buy one at the store. Ten months after were once not customer-centric are suddenly faced implementing this policy, Boston Tea Party had kept with learning the customer centricity ropes—the hard Other companies use purpose-led innovation 125,000 single-use cups from landfills. It also lost way. Utilities are one such industry in which purpose-led to create a sense of belonging for customers. £250K (US$327K) in sales. But the company had innovation in the area of environmental sustainability Tony’s Chocolonely, a Dutch confectionery company, factored this loss into its planning. As owner Sam has become their gateway to purpose and to a customer invites its consumers to be part of its purpose and Roberts put it, “We felt this was a financial loss we focus. No better example exists than with Enel, Europe’s rally behind its anti-slavery cause—and provides had to take and we want this to be a call to action 10 largest utility company, that took purpose-led innovation them information and opportunities to do just that. to other companies….We are 100% committed and there’s no going back.”11 head-on with it’s wholesale shift to a new positioning Gen Y and Z consumers are drawn to brands and strategy squarely aimed at consumers and that that put purpose before profits and stand for promises to deliver the fidelity of purpose consumers The bottom line is that virtually everything a company demand. At its core are two principles of sustainability something bigger than what they sell. Such brands does—and everything on which it can be judged and innovation, the latter of which is uniquely anchored take intentional risks. Their actions are driven by —can be innovated through the lens of purpose. in culture rather than technology. And they boldly put authenticity, not financial performance. Boston Tea This includes products and services, certainly, but 8 Party, an independent coffee chain in the United also supply chains, processes, organizational models, their commitment to their new Open Power purpose Kingdom, took the innovative action of banning out front: “Innovation must be cultural, rather than customer and employee experiences and more. technological, and that means being open to ideas single-use coffee cups. that come from both inside and outside the company. 7 | GENERATION P(URPOSE)

INNOVATION FOR CONSUMERS, Purpose-led innovation translates the WITH CONSUMERS promises a brand stands for into actions Gen Y and Z consumers welcome and tangible outcomes. This type of the chance to participate in co-creation innovation lends credibility and authenticity activities. And they reward companies to purpose. It aligns brands with consumers’ that solicit their ideas. deeply held beliefs. And it creates a sense of belonging that consumers crave. 51% are likely to respond when a company asks them to submit suggestions for a product or service. 65% are more likely to buy something from the company that asks for their input. 8 | GENERATION P(URPOSE)

Innovate for purpose, with purpose A majority of consumers—and especially those in the Gen Y and Z cohort—expect brands to be rooted in a greater purpose and companies to make their commitments known in multiple ways. As companies look to build fidelity, three innovation actions are worth considering. Innovate products and services. Innovate supply chains. Innovate employee experiences. More than half (51%) of Gen Y and Z consumers are Nearly two-thirds (63%) of Gen Y and Z consumers Sixty-four percent of Gen Y and Z consumers are attracted attracted to brands that translate their values into new are more attracted to brands that source services to buy from companies that treat their employees well, and innovative products and services. Moving forward, and materials in highly ethical ways. Innovations in accordance with the values they promote. There are every new product or service innovation must be firmly to create ethical supply chains (and bolster purpose’s a lot of innovative things companies can do to ensure and clearly aligned to purpose. Companies that have fidelity) may not change the end product at all— their purpose is reflected in employee experiences— purpose might consider acquiring brands that are aligned just the manner in which its contents are sourced. from ensuring pay parity to creating policies that enable to their—and their customers’—values. An acquired brand all workers to achieve a healthy work-life balance. that excels at purpose-led innovation can help strengthen Blockchain and digital mapping technologies have the fidelity of purpose that already exists. emerged as crucial tools for proving that supply chains Grocery chain Wegmans attributes the passion and are sustainable and use materials from reputable, devotion of its customers to its exceptional investment But what about existing brands in the portfolio? 13 in the training, development and happiness of its ethical sources. Food companies One Degree Organic 16 Companies have several options. They can, for example, and Mondelez14 employees. For example, it sends its deli workers take advantage of emerging technologies. Coca-Cola enable consumers to trace their product to France to learn about cheese and its butchers to ingredients back to their origins. Intel has established 17 and AB InBev are doing that with KeelClip, a recyclable a responsible minerals sourcing program and also Argentina to learn about beef. For companies in which paperboard product that replaces traditional shrink- works with 50 strategic suppliers to combat forced purpose-led innovation is aligned to respect for the 12 wrapped plastic. Companies might also consider 15 individual, the returns on investment can be huge— co-sourcing innovation to achieve fidelity of purpose and bonded labor. not only in terms of more engaged workers, but also —either with other companies or even their consumers. consumers who appreciate and reward the companies that treat their employees the way they deserve. 9 | GENERATION P(URPOSE)

Walk the talk To increase fidelity of purpose, incumbent companies Contact our authors to learn must ensure their products and services, processes, how to use innovation to image, experiences and any other characteristic on which bring fidelity to your consumers and investors might judge them reflect the company’s purpose. essence of who they are as a company and align with the aspirations and values of their customers and employees. Fidelity requires innovative thinking, demonstrable convictions and, above all, authentic actions that bring purpose to life every day. ABOUT THE RESEARCH Accenture Strategy conducted its 15th annual Global Consumer Pulse Research study to gain an understanding of global consumers’ preferences, beliefs and behaviors. The survey of 25,308 consumers in 36 countries was designed to identify how consumer expectations are evolving—and how companies can capitalize on that evolution to achieve new levels of growth and competitive agility. 10 | GENERATION P(URPOSE)

ABOUT ACCENTURE REFERENCES CONTRIBUTORS Accenture is a leading global professional services company, 1 Sandhiti Kale Lee J. Miller and Wei Lu, “Gen Z is Set to Outnumber providing a broad range of services and solutions in strategy, Millennials Within a Year,” Bloomberg, August 20, 2018. Principal, Accenture Strategy consulting, digital, technology and operations. Combining 2 unmatched experience and specialized skills across more Accenture Global Consumer Pulse Research, 2019. Michael Malinoski 3 than 40 industries and all business functions—underpinned Accenture Strategy analysis, 2020. Based on annual consumer Senior Principal, Accenture Research by the world’s largest delivery network—Accenture works spending across 12 consumer industries and 17 key markets Anna Marszalik at the intersection of business and technology to help clients driven by poor or superior “fidelity of purpose” as it impacts consumers’ switch or stay decisions. Manager, Accenture Research improve their performance and create sustainable value for their 4 stakeholders. With 505,000 people serving clients in more than National Retail Federation, “Checking In with Gen Z,” Olivier Schunck 120 countries, Accenture drives innovation to improve the way October 7, 2019. Principal Director, Accenture Strategy the world works and lives. Visit us at www.accenture.com. 5 Jack Kelly, “Millennials Will Become Richest Generation In American History As Baby Boomers Transfer Over JOIN THE CONVERSATION Their Wealth,” Forbes, October 26, 2019. ABOUT ACCENTURE STRATEGY 6 Claudine Gartenberg and George Serafeim, “181 Top CEOs @AccentureStrat Accenture Strategy combines deep industry expertise, advanced Have Realized Companies Need a Purpose Beyond Profit,” analytics capabilities and human-led design methodologies Harvard Business Review, August 20, 2019. Accenture Strategy LinkedIn 7 that enable clients to act with speed and confidence. By identifying Olivia Raimonde, “Money from Socially Responsive Investors clear, actionable paths to accelerate competitive agility, Accenture Flows into US Water Stocks,” CNBC, October 20, 2019. Strategy helps leaders in the C-suite envision and execute strategies 8 https://www.enel.com/enel-is-open-power that drive growth in the face of digital transformation. 9 https://www.enel.com/aboutus/who-we-are For more information, follow @AccentureStrat or visit 10 www.accenture.com/strategy. https://tonyschocolonely.com/us/en 11 BBC News, “Coffee cup ban: Boston Tea Party’s sales fall by £250k,” April 2, 2019. 12 Rachel Arthur, “Coca-Cola replaces plastic wrap with new paperboard technology,” BeverageDaily.com, November 20, 2019. 13 Alexis Bateman and Leonardo Bonanni, “What Supply Chain Transparency Really Means,” Harvard Business Review,” This document makes descriptive reference to trademarks that may be August 20, 2019. 14 owned by others. The use of such trademarks herein is not an assertion Micah Maidenberg, “Food Companies Put Supply Chains of ownership of such trademarks by Accenture and is not intended to Under a Microscope,” Wall Street Journal, October 9, 2019. represent or imply the existence of an association between Accenture 15 Corporate Responsibility at Intel, “Do Wonderful,” and the lawful owners of such trademarks. 2018-2019 Report 16 Pamela N. Danziger, “Why Wegmans Food Markets Gets the Copyright © 2020 Accenture. Love of Customers,” Forbes, March 3 2018. All rights reserved. 17 Ian Cassel, “Robert Wegman - Building the Cult of Wegmans Accenture and its logo are trademarks of Accenture. Food Markets,” Intelligent Fanatics, September 3, 2018. 191865