Those of us impatient for change — in our organizations, among our customers, within society — would do well to sit with this fact: People are more motivated to avoid losses than to achieve gains. How much more? About twice as motivated.

This is just one of many thought-provoking research findings explained by preeminent psychologist Daniel Kahneman in his latest book, “Thinking, Fast and Slow.”

This is my second post exploring what some of Kahneman’s findings could hold for brands and the organizations and leaders managing them. Earlier I looked at the distinction between plausibility and probability in the brand stories we tell. Here I’m interested in what humans’ deep-seated aversion to loss means for purveyors of change.

Fear of loss vs. desire for gain

Helping organizations and their leaders inspire change is at the heart of much of my work. Goes with the territory of working with nonprofits and businesses that are unsatisfied with the social, environmental or economic norm. For them, change rarely comes fast enough.

Most of us learn early on that people resist change. But as Kahneman has helped me understand, it’s not just any change. It’s change framed or experienced as loss.

When directly compared or weighted against each other, losses loom larger than gains. This asymmetry between the power of positive and negative expectations or experiences has an evolutionary history. Organisms that treat threats as more urgent have a better chance to survive and reproduce.

In other words, human nature can easily foil the best laid plans of organizations, leaders or brands seeking behavioral change. Protectors of the status quo have a built-in advantage.

Loss aversion is a powerful conservative force that favors minimal changes from the status quo in the lives of both institutions and individuals. This conservatism helps keep us stable in our neighborhood, our marriage, and our job.

Heads I lose, tails I lose

To use one of Kahneman’s examples, let’s say you’re offered a gamble with a flip of a coin. Tails, you lose $100. Heads, you win $150. If you’re like most people, you would reject the gamble because, as Kahneman says, “the fear of losing $100 is more intense than the hope of gaining $150.”

Across this experiment and others, the “loss aversion ratio” tends to fall within a range of 1.5 to 2.5. So while some people might take the bet at $150, most would insist on gaining at least $200 or $250 if the coin turns up heads.

Kahneman has observed loss aversion elsewhere:

• the aversion to the failure of not reaching a goal is much stronger than the desire to exceed it
• a golfer’s aversion to making a bogey is greater than the desire for birdie (and therefore golfers have greater success avoiding bogeys)
• we punish meanness more reliably than we reward generosity (Says Kahneman, “Altruistic punishment could well be the glue that holds societies together.”)

The lesson in loss aversion

Seems to me, there is an exquisite lesson to be found here: If you’re promising or selling change, it had better be good — at least twice as good as the status quo your audience holds close.

And how would you go about determining the strength of your appeal? You could start by identifying the people who matter to you most, your target audience. Get into their world. Make sure you understand what they would have to give up to embrace your product or service, organizational reform, habit or behavior change or any other action you want from them.

In other words, what’s their reference point, their status quo? That tells you what you’re up against. Before people will move in the direction you want, they have to believe they stand to lose peanuts compared to what they would gain.

Unseating the incumbent

The question then becomes: Are you offering something far more appealing than what your customer or stakeholder has or experiences today? If you want to unseat the incumbent brand, idea or behavior, Kahneman’s research tells us, you gotta deliver big. Incremental benefits just won’t cut it.

To ascertain whether your offer qualifies as 2x big, you’ll have to ask your target audience. On a scale between “must avoid at all costs” and “will pay whatever it takes,” how intense is their desire for the gain you promise? If you’re missing a high intensity connection, you have three choices:

1. Improve your offering
2. Improve your storytelling
3. Lower your expectations for change

Or maybe you see a fourth choice: stick to selling the status quo. No? I didn’t think so.

But there was one small problem: Our firm never delivered the product — at least not nearly as advertised.

We had sold an incredible story, not an incredible product.

Today, I am looking back at that experience through the lens of one of the most provocative books I have read in years: “Thinking, Fast and Slow” by Daniel Kahneman, winner of the 2002 Nobel Prize in Economic Sciences. Kahneman is actually a psychologist but his work around decision making challenged the prevailing rational model of judgment in economics. He is professor emeritus at Princeton University.

Kahneman’s book, published in 2011, brings together his decades of research and thinking into a single volume. Although written for a general audience, it presents an almost endless stream of insights and warnings for those of us in branding or marketing willing to apply his research to what we do.

One of those warnings: Beware of the brand story that is merely plausible. We marketers play a crucial gatekeeper role with the stories organizations tell. But it takes some effort to resist the story we wish were true in favor of the one that probably is.

Plausible, not probable

For some years after the launch of the-product-that-wasn’t, my joking words of advice were: “Never let facts get in the way of a good story.” Turns out, most of us don’t.

As Kahneman’s research proves in spades, our automatic self (he calls System 1) dominates our effortful self (System 2) in most aspects of our lives. The fast-thinking System 1 is constantly spinning stories out of the flimsiest of material in a never-ending attempt to create coherence of events and experiences in our lives and world.

“The most coherent stories are not necessarily the most probable, but they are plausible,” Kahneman says. We humans routinely neglect or misunderstand statistical probability in our beliefs and decisions and in the stories we end up telling ourselves about them. Why? Because System 2 is lazy, according to Kahneman.

The evidence is persuasive: activities that impose high demands on System 2 require self-control, and the exertion of self-control is depleting and unpleasant.

The story I was involved in telling on behalf of my employer was highly plausible because it was coming from a company that was considered the industry leader. But given what we were promising as a company, our story was also highly improbable.

Ignoring the red flags

One of the company founders told everyone inside the company that few software companies with large customer bases successfully manage to transition them to the next-generation product. He meant it as a rallying cry. It should have been a red flag.

In all probability, we would not succeed because few companies in our position before us were successful. But no one stopped to seriously question our prospects. Not only did our company downplay the odds, it promised far more in the product than what was remotely possible in the time frame we announced it would ship. So it became even less likely the product would succeed.

But, man, did we ever tell a great story. The company’s System 1 fired on all cylinders. Our fantastic story was plausible because the company had a track record of tremendous growth, charismatic leadership and some loyal customers and industry pundits willing to say they liked what they were seeing and hearing from us.

Our System 2, however, failed us. In a company of “rational” engineers, no one in a position of authority said what needed to be said: “We have almost no chance of delivering what we are promising, not only in the time frame we’re committing to, but ever.”

Instead, we let the System 1 storyteller run the show. Ultimately, the inability to deliver as promised contributed to a layoff of hundreds of employees. Even the co-founder who tried to rally everyone behind the mammoth undertaking lost his job.

Waking up your System 2

With the help of Kahneman’s findings, I have new appreciation for how easily organizations delude themselves. Spinning heroic business tales apparently doesn’t take much effort. Plus it’s emotionally satisfying. Who wouldn’t choose that over exerting self-control, challenging the organization’s System 1 auto pilot and stopping the story rocket before it launches.

What this means for branding and marketing professionals is we have to guard against easy narratives that send emotions soaring only to sink under the weight of reality.

A brand is a promise of an experience. When our organization’s System 1 is in charge, our brand stories can get far ahead of our ability to deliver as promised. And as my former employer learned, that can have disastrous consequences in the form of lost jobs, damaged reputations and severed customer relationships.

Today’s brands rise and fall on their ability to meet customer and stakeholder demands for authenticity, transparency and integrity. That’s a job for System 2. Does it need a wake-up call in your business or nonprofit?

New research by Harvard’s Nathalie Kylander and Christopher Stone suggests why. Drawing on interviews across 41 organizations, Kylander and Stone identify four reasons for skepticism toward branding among nonprofits:

1. Nonprofit leaders widely associate branding with “the commercial pursuit of monetary gain,” which debases their work.
2. A brand is often seen as “peremptorily imposed from above” in lieu of a strategic planning process, which is viewed as more participatory.
3. Some believe leadership vanity is a larger motivation for branding than fulfilling a mission.
4. Large nonprofit “bully brands” overshadow weaker organizations and “give brand management a bad reputation.”

These and other reasons for skepticism can’t change one fact: Any organization, nonprofit or for-profit, has a brand the moment it opens for business and people experience it. The question isn’t brand or no brand; it’s how well the brand is managed, communicated and experienced.

Branding, the nonprofit way

In an era of proliferating nonprofits, declining public and donor resources and rising demand for charitable services, the competition for financial, volunteer and partner support is greater than ever. Nonprofits that ignore their brands risk irrelevance and indifference among their stakeholders. And yet most charitable organizations – knowingly or unknowingly – take the risk.

Beyond skepticism is a more basic reason for brand neglect: a widespread lack of understanding of what a successful nonprofit brand looks like and how to create one. Here we have some good news. Nonprofit leaders now have two recent and smart contributions toward a deeper understanding of the whats, whys and hows of creating and managing an effective nonprofit brand.

One is Kylander’s and Stone’s article, “The Role of Brand in the Nonprofit Sector,” in the Spring 2012 issue of the Stanford Social Innovation Review. The other is the 2011 book, “Breakthrough Nonprofit Branding: Seven Principles for Powering Extraordinary Results.”

Both works go far to defuse doubts about the value and desirability of a strong, well-managed nonprofit brand.

A nonprofit brand framework

Kylander and Stone, both with Harvard’s Hauser Center for Nonprofit Organizations, found the tools and models available to nonprofit brand managers rely too much on the brand language and approaches used in the for-profit sector.

To rectify that shortcoming, the authors offer a conceptual brand framework designed specifically to help nonprofit leaders better manage their brands. They call it the Nonprofit Brand IDEA, the culmination of an 18-month research project.

From their 73 interviews, they concluded the role of brand is changing among nonprofits:

A decade ago, the dominant brand paradigm in the nonprofit sector focused on communications…Branding was a tool for managing the external perceptions of an organization, a subject for the communications, fundraising, and marketing departments. In contrast, the emerging paradigm sees brand as having a broader and more strategic role in an organization’s purposes, methods, and values. Increasingly, brand is a matter for the entire nonprofit executive team.

The four principles of Nonprofit Brand IDEA comprise brand integrity, democracy, ethics and affinity:

1. Brand integrity: “the organization’s internal identity is aligned with its external image and that both are aligned with the mission.”
2. Brand democracy: “the organization trusts its members, staff, participants, and volunteers to communicate their own understanding of the organization’s core identity…(This) is largely a response to the growth of social media, which has made policing the brand nearly impossible.”
3. Brand ethics: “the brand itself and the way it is deployed reflect the core values of the organization. Just as brand integrity aligns the brand with mission, brand ethics aligns both the organization’s internal identity and its external image with its values and culture.”
4. Brand affinity: “the brand is a good team player, working well along side other brands…Organizations with the strongest brand affinity promote the brands of their partners as much as or more than they promote their own brands.”

Balanced against brand skeptics in the authors interviews were brand enthusiasts who believe a strong brand builds cohesion and capacity.

When an organization’s employees and volunteers all embrace a common brand identity, it creates organizational cohesion, concentrates focus, and reinforces shared values….Strong cohesion and high levels of trust contribute to greater organizational capacity and social impact.

The new nonprofit imperative

While Harvard’s Kylander and Stone contribute a useful model for constructing a nonprofit brand, they don’t offer much guidance in how to actually build one. That’s where the four authors of “Breakthrough Nonprofit Branding” come in.

Experienced in marketing, communications and public relations, the authors provide a comprehensive, step-by-step approach to branding the nonprofit, backed by a breadth of research and numerous case studies. Breakthrough branding, they argue, is “the new nonprofit imperative.”

More than simply a cosmetic makeover, at the base level, branding is the about identifying what your organization stands for—the unique, differentiated ideas that sets it apart. To build your brand requires forging an emotional and personal connection with your core stakeholders. Your brand must stand for a cause—something bigger than organizational activities, something your constituents care about and believe in. Yet, to truly break through calls for you to rally a community around your brand’s meaning and inspire action.

The book examines what the authors call “the Seven Principles of Breakthrough Nonprofit Branding” accompanied by examples of standout nonprofits of all sizes and locations putting the principles to work:

1. Discover the authentic meaning of your brand: “A brand is the bridge between an organization’s unwavering mission and its evolving strategies.”
2. Embed your brand meaning across the organization: A breakthrough brand (BNB) “embeds its brand meaning into every organization function, from people management to information technology systems.”
3. Rally internal brand ambassadors: “A breakthrough brand continuously attends to the way its brand is expressed through the actions and attitudes of its internal stakeholders.”
4. Develop 360° brand communications: “Utilizing a variety of integrated communications, including both online and off-line tools, the effective brand dynamically expresses its essence in ways that are meaningful and relevant to them.”
5. Expand your brand by mobilizing an external community: “A BNB acts as a connector. It builds external communities, knowing that a critical mass of the right people mobilized behind its work is the most effective way to propel its cause.”
6. Cultivate partners to extend your brand reach and influence: “A truly breakthrough nonprofit brand values strategic alliances that offer access to new expertise, relationships, and assets.”
7. Leverage your brand for alternative revenue and value: “Breakthrough nonprofit brands use their brand meaning to extend reach, generate untraditional revenue, and build brand equity through their entrepreneurial endeavors.”

What about the small nonprofit?

While nonprofit leaders reading the article or book should be persuaded of the value in managing their brands, they may still resist because they lack money, staff and/or expertise. Small, under-funded nonprofits are the norm. Branding, even if considered desirable, can be seen as out of reach for the average organization.

Neither the article nor the book go far enough to address this perception. While branding, like fundraising, is really not a choice for any nonprofit, the question for the small nonprofit remains: How can we pull it off?

My reply is: Focus on what you can do and can afford and do the work of branding piece by piece over a period of months, even years. Take stock of what you can accomplish via staff, board or volunteer leadership and contributions. And raise or set aside some budget to supplement where needed with outside professional help, such as consultation on a branding approach, integration with your strategic plan, graphics design or marketing communications.

Branding can be expensive, but it doesn’t have to be. As the article and book authors make clear, there is also a cost in neglecting your brand — and a mission to be achieved by giving it your time and attention.

In a recent Huffington Post column, nonprofit consultant Thenera Bailey says social change organizations understand the need for long-term impact.

But too often along this road of change, many of us somehow get sidetracked. Creating sustainable solutions to social problems gets replaced by the creation of solutions that will sustain our organizations and keep our doors open… Non-profits need to be in the business of putting themselves out of business — not with unwise spending, but with strategic and long-term solutions that will put an end to their cause.

Why not hold business to the same standard?

Imagine this: A CEO stands in front of his or her team and proudly announces, “Congratulations, we’ve accomplished our mission as a business! As of today, the question we will be focusing on is whether to begin closing our company down or finding a new reason for being.”

Hard to picture, isn’t it? Why? My educated guess is businesses rarely identify missions with a concrete, measurable end point in mind. A point at which those who run the company know they’ve done what they or the founders ultimately set out to do. And now the choice is to either close up shop or start over.

I put this out there because I wonder whether “mission-driven” will be as good as it gets in business. Or might some of our most admirable companies hold themselves to an even higher standard — accomplishing their mission?

Patagonia and B Corps

Consider Patagonia. In January 2012, when Patagonia became the first company to register as a benefit corporation in California, company founder Yvon Chouinard applauded the new state legislation that provides a legal foundation for mission-driven businesses.

“Patagonia is trying to build a company that could last 100 years,” said Chouinard. “Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership.”

I am one of Patagonia’s biggest fans. I am also an enthusiastic supporter of B Corps’ pioneering efforts to create a thriving sector of businesses driven by socially and environmentally responsible missions. And I think the problems in front of us ask us to complete our missions and produce lasting solutions.

Missions without end?

Awhile back, I came across a succinct and useful distinction between vision and mission: Vision is something to be pursued; mission is something to be accomplished.

Having reviewed hundreds of mission statements and helped organizations create or change their own, I am wondering whether we too often confuse vision for mission. Our missions routinely fail to establish an implicit or explicit point in the future when we’ve achieved our purpose as a business. Instead, the most we can say is we are in constant pursuit – we are mission-driven.

Patagonia’s mission statement, for example, reads: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.

While I applaud the values demonstrated here, I don’t see where Patagonia’s purpose will ever be fulfilled. The quality of “best” is evolving constantly, so Patagonia won’t reach a point of having the best products and announcing “game over.” And “the” environmental crisis is sufficiently vague and unbounded as to be unsolvable, at least by any single entity. It reads more like a vision Patagonia is pursuing, along with their stakeholders and many other individuals and organizations across the globe.

The distinction between mission-driven and mission-accomplished isn’t simply splitting hairs. It’s significant. I can imagine being driven by a desire to build the best product while protecting and improving the environment. I could also imagine a company, like Patagonia, being driven by that desire for a century or more. But that also suggests a company’s mission — its reason for being — is without end.

Longevity vs. accomplishments

This begs the question: Is an organization’s longevity more important than its accomplishments?

Being driven to achieve something is much different than actually achieving it. The former means we’re motivated to keep trying for however long it takes. The latter means we can stop trying because we accomplished our goal. And now we have a new decision to make: Do we put an end to our business, satisfied that we achieved our mission, or do we find a new reason for being?

Thenera Bailey says social change nonprofits have raised millions of dollars and broadened awareness for issues such poverty, water security, HIV and human trafficking. “But at the end of the day,” she writes, “many of these issues are no closer to being solved than they were a decade ago.”

She’s right. What we desperately need are solutions. Patagonia and other benefit corporations give me great hope. And I also believe a higher calling awaits the mission-driven. It sounds something like this: Problem solved. Mission accomplished.

The results aren’t surprising, although they are telling. Independence is a cherished trait for governments, businesses and individuals, especially in a country whose Founding Fathers didn’t put their lives on the line for a Declaration of Interdependence.

And yet, to be truly independent seems largely a fantasy. Are we ever not subject to the authority of someone else, not influenced by the thoughts or actions of others, not depending or contingent upon something else for existence or not relying on others for support in one form or another?

One reason we cling to the notion of independence is no one likes the idea of being dependent. Who wants to be powerless?

Not Independent, Interdependent

Certainly we all start out in life as dependent upon others. As we grow, that changes. We assert our independence, or so we think. What we really reach is a state of interdependence, where we and others are mutually dependent. We depend on others. Others depend on us. It’s that way in our relationship with the environment. We depend on it. It depends on us.

And it’s that way in business. The quaint idea of the independent business on Main Street has its purpose; namely, to differentiate itself from the faceless, corporate-owned businesses, otherwise known as chains or franchises, occupying blocks of faceless strip malls.

But the idea of any business being truly independent is simply untrue, even self-defeating. Success in business doesn’t come by setting your organization apart from  customers, employees, partners, suppliers, communities and, yes, the environment. Our businesses depend on others, just as we’d like to think others depend on our business. It’s when we dismiss interdependence as a sign of weakness that we get into trouble. Arrogance takes root. We think we know what’s best for us and for others. We stop listening. We exhibit no curiosity about others. And then we wonder why our competitors are lauded for their creativity and innovation.

We don’t succeed alone

Business being a competitive sport long played primarily by men, perhaps interdependence is unmanly. And yet, name a championship athlete that rose to the top on his (or her) own. Certainly, not in a team sport. How about tennis players, golfers, runners, skiers, wrestlers or any other individual sport athlete? They absolutely depend on others. Even if it’s only other competitors. There’s no sport without competitors.

Interdependence isn’t about weakening your position or relinquishing control. I learned early on as a business owner that “being in control” was a myth. Once I started taking on employees and clients, I quickly became aware I didn’t call all the shots. My clients could come and go as they please. As could my employees, especially my best ones. And that’s saying nothing about the economy. None of us can prevent bursting bubbles and recessions.

The best thing we can do in business is to recognize we are not independent actors. Our businesses are who they are as the result of a complex interplay of customer decisions, competitive maneuvering and economic and environmental systems that sometimes work to our advantage, sometimes to our disadvantage. Conditions around us are changing constantly, a response to this endless interplay, which seems to only have multiplied and accelerated as technology races on.

What we can control

What we do have something to say about is how we respond to situations as they arise. It’s not as though everything is outside our control, so nothing that we do matters. We can control the reason we exist as a business, the larger purpose or motivation for showing up to work each day. We can control who we are being as a business — a business others want to come into contact with and benefit from. We can control the values we operate by. We can choose to bring passion and compassion to our work. We can put resilient systems into place. We can rethink our products and services. We can compete like hell to win. In short, we can do everything that businesses have been doing forever.

We just can’t do it by thinking we can do it all alone. There is a world that depends on us. And we depend on it. So let’s take good care of each other.

That’s how it is across professional service markets such as legal, health care, accounting, business consulting, marketing, engineering. Setting aside superficial points of distinction such as name and logo, too few firms are finding substantive ways to stand out from the crowd. And no good comes from that, as business advisor Scott McKain argues in his 2009 book, “Collapse of Distinction”:

If you cannot find it within yourself to become emotional, committed, engaged, and yes, fervent about differentiation, then you had better be prepared to take your place among that vast throng of the mediocre who are judged by their customers solely on the basis of price. It is singularly the worst place to be in all of business.

And yet, that’s where most businesses, service or otherwise, find themselves. Rather than dive into the many reasons for this state of affairs, I’d like to address just one: Too few in business understand how to create relevant distinction.

When I say relevant, I mean distinction that identifies you as different from your competition and is meaningful to your clients and other stakeholders in your business. After all, you may be truly different but if that difference doesn’t matter to your clients or those who work for you, then it’s of no value.

I share McKain’s perspective:

Creating differentiation doesn’t mean you have to become completely, totally unique from your competition from top to bottom. It simply means you must create small, solid points of distinction that are recognizable and important from the customers’ perspective because customers perceive that different is better.

7 dimensions of service brand distinction

So how can you create these solid points of distinction for your service business? I just answered that question for one of my clients and will share what I came up with. I call it the seven dimensions of service brand distinction. I’m confident you will find valuable areas of relevant distinction in one or more of these realms:

1. What we do: The obvious starting point of distinction for most of us is what we offer and the needs we address. Here our differentiation strategy is on providing a unique service or solving an unmet market need.
2. How we do it: We might look to our models, methods and systems we use or the culture we’ve built to deliver our services. Our focus is doing the same or similar things better than our competitors, whether it’s being smarter, more strategic, more creative, more prepared than those like us.
3. Who does it: This dimension asks us to examine our collective character and personality – who we are being as a firm in the conduct of business. This strategy asks us to see our firm as more than a collection of unique individual service providers and find ways to adopt and exhibit a shared set of traits. We’d emphasize training and careful hiring that stress the ability of employees and partners to consistently be who we say we are as a business.
4. For whom do we do it: This looks for distinction in the markets and clients we serve – a commonly used method of differentiating. We would focus on serving niche or specialty markets or parts of organizations that are under-served or poorly served today.
5. Where do we do it: This isn’t just about differentiating on where our offices and clients are; it can also be about where we concentrate our services – the strategic front-end of an engagement, the tactical back-end execution, somewhere between or all of the above. Our strategy may include being the best provider in our service category in our community, focusing on building an expertise and national reputation in a specific industry niche or identifying specific points upstream, midstream or downstream in solving a client’s need.
6. Why do we do it: This is what I would call the existential point of distinction. It derives from our mission (our reason for being as a s business), what we stand for, our core beliefs and values, the difference we want to make. Here we focus on engaging like-minded stakeholders in our overarching purpose and demonstrating we do what we do to make a larger social, environmental or economic difference.
7. Do we do it: Here we emphasize proof. We are who we say we are, we do what we say we do and we deliver what we say we’ll deliver. It may be that all our competitors are saying the same thing. We are the ones who actually walk the talk. Our strategy is on delivering on the client experience we promise, measuring and being accountable for positive client outcomes and cultivating and communicating proof of performance.

This list is not an exhaustive source of where you can find and create those “small, solid points of distinction,” but it’s a great place to start. What this list presupposes is you also have a solid understanding of 1) what your clients want and need and how they experience your business today and 2) what distinction strategies are being used by similar or competitive firms. Otherwise, you run the risk of being both irrelevant and indistinct. Chances are that’s a position your competition already owns. Gladly leave it to them.

Photo credit: MrB-MMX at Flickr