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Cultural Shift Fuels Business For Magic Johnson And Mike Fernandez That Corporations Are Not Seizing

06/24/2015 11:21AM

By Glenn Llopis

On June 11, 2015, my organization led an invitation-only Executive Summit called, “Preparing U.S. Leadership for the Seismic Cultural Demographic Shift™,” held in Irvine, CA. This intimate gathering represented leaders from the C-suite and senior executive roles from more than 20 Fortune 500 companies across multiple industries, but they all had one thing in common – they are among a select few who have taken the lead to get out in front of the shift by becoming change agents for the companies and industries they serve. Among them were executives from Summit host and sponsor CVS Health, as well as supporting sponsors Aramark and The Axis Agency.

Click on the here to access to the Executive Summit Photo Gallery and Sizzle Video.

I’ve written and spoken about the cultural demographic shift often enough, and when I do I often get asked, “Is it really a big enough ‘burning platform’ to merit this much attention?” The insights and frontline experiences shared by Summit attendees not only back-up the urgency but validate the need to take action now. And backing these leaders up is the fact that the opportunity gap amongst the top three market leaders across every major U.S. industry is on average more than $10 billion.

The cultural demographic shift represents a natural evolution of American enterprise, its business models and what is required to compete in today’s fiercely competitive global marketplace. No one knows that better than those leaders who live with an entrepreneurial spirit and follow their passionate pursuits of excellence. For them, the cultural demographic shift is fueling business innovation that most U.S. corporations don’t see – even as the opportunity sits right in front of them.

It was my honor to discuss this very topic at the featured Summit roundtable with two such entrepreneurs and potent pioneers, Earvin “Magic” Johnson, chairman and CEO of Magic Johnson Enterprises, and Mike Fernandez, chairman of MBF Healthcare Partners.

I’ve been fortunate to get to know Mike’s journey as an entrepreneur, leader and business pioneer. His book, Humbled by the Journey: Life Lessons For My Family…And Yours (with proceeds going to The Early Childhood Initiative Foundation), is also quite inspirational. In it, he shares lessons learned from his Hispanic upbringing and the values that inspired him to work hard, overcome obstacles and help others along the way. It was Mike who invited his friend and business partner Earvin Johnson to the Executive Summit, knowing how well his own story and successful business foray into the urban/minority community can serve as a wider model for preparing U.S. leaders for the cultural demographic shift.

Indeed, Earvin has been a pioneer in the urban/minority space, first seeing the tremendous opportunity gap and then convincing some top Fortune 500 companies to partner with him in this venture. Brought up in the same neighborhoods, Earvin understands first-hand what people in these communities want – just like anybody else, quality services and goods. But the difference is, urban minorities often have to drive outside their communities – sometimes up to an hour – to get them.

“Fortune 500s are always looking for growth and new ways to drive ROI, so I saw the opportunity to bring these companies to urban America,” explained Earvin to the crowd. “But you have to look at it almost as you would entering a foreign country. You can’t have a cookie-cutter mentality, you have to tailor your approach in terms of fitting into urban America, not the other way around. If you know the urban consumer like I do, then you know you first have to educate them about your brand, tell them why it’s important to them, what it’s going to do for them, and how it’s going to make their life better.”

Sony was the first company that Earvin partnered with, launching the widely-publicized Magic Johnson Theatres. Urban minorities were the no. 1 group of consumers going to the movies, but there were no theaters in their communities to speak of. So he approached Peter Guber, who was running Sony at the time, and said, “I have potential growth for your company.” Potential growth is exactly what the cultural demographic shift means to corporate America, and Earvin Johnson was one of the first to recognize it and do something about it.

Each partner brought their area of expertise to the table, and then they went out into the community, speaking first to clergy, council people and other leaders and organizations, explaining the benefits of building Magic Johnson Theatres there, not only for movie goers, but for the jobs it would create.

Despite the naysayers who said it would never work, Magic Johnson Theatres was one of the top 10 highest-grossing theaters in the nation when it opened – and one of the top two or three highest-grossing theaters in the Sony chain. And having adapted the concession stand to reflect the tendencies and tastes of the community, the per caps were some of the highest in the industry. Earvin Johnson knew that to be successful in urban America, you simply had to understand the people in the community and then deliver what they want.

“If you can deliver an experience that resonates with the urban consumer, and makes them feel like this is their place, they’re going to begin to trust your brand and become a loyal customer – who not only comes back again and again, but brings their families and tells all their friends,” explains Earvin. “And if you hire within the community and train them to do their jobs, you’re going to get a dynamic workforce who become brand ambassadors that go out and sell your business for you. Because they’re going to take great pride in where they work and what they do and want to tell everyone they know about it.”

Knowing all this, the legendary basketball player reinvented himself as a successful businessman – and was soon partnering with companies like Starbucks and people like Mike Fernandez. Like-minded people who knew that you could do well and do good at the same time. You can drive ROI and at the same time create societal impact and help the community grow. Or you can go in wanting the urban community’s business but not really caring about them, perpetuating the disconnect and mistrust that fuels the tension points between corporate America and the cultural demographic shift.

So why are so many executives in the C-suite still taking the latter approach?

Mike Fernandez sees it as an issue of ownership. “Ownership is the difference between wanting to be relevant and someone who just allows the marketplace to pass them by,” says Mike. “Leaders must take ownership –and must always have a strategy for change that is focused on constant evolution and with the end game in mind. For those who can see beyond the obvious and anticipate the unexpected, it becomes their most valuable asset over those who are slow to make decisions and take action.”

Unfortunately, he says, too many leaders are still focusing most of their energy on the 73% or so of the population that looks like them. That’s leave 27% of the population – or 100 million people – who don’t fit into that neat little box. His advice: forget about thinking outside the box, and realize there is no box.

In his experience acquiring companies, he’s seen how organizations work hard to satisfy the needs of the majority, while assuming that the minority will adapt and buy whatever they are selling. And this is why so many of them fail. By way of example, he said, if you look at the Fortune 500 list of companies from 1955, most of them no longer exist today. Why? They not only failed to anticipate change – they were unable or unwilling to adjust once the changes came.

Today’s companies cannot afford to resist change either, or they risk becoming irrelevant in the not too distant future – when by 2050 the minority becomes the majority. Already they represent the seventh largest economy in the world, yet very few companies are investing enough to get to know them – this opportunity of unprecedented proportions sitting right in their own backyard.

CVS Health is one company that sees the opportunity. In July 2014, Mike’s organization MBF Healthcare Partners sold Navarro Discount Pharmacies to CVS Health. This acquisition serves as a case study for how Fortune 500 companies can serve the cultural demographic shift. Successful and profitable implementation of this model will have significant societal impact and influence how brands can take an authentic in-culture approach to serving Hispanic consumers.

As a result of this acquisition, CVS Health has launched its new CVS Pharmacy y Mas banner in South Florida with plans to expand into its other U.S. Hispanic markets. “With more than 7,800 stores across the U.S., we understand that our retail pharmacies should not be one size fits all for the diverse communities we serve,” said Helena Foulkes, President of CVS/pharmacy. “CVS/pharmacy y mas stores are designed to be a place where our Hispanic customers feel at home to receive our best-in-class pharmacy service, along with personalized products and services to better meet their diverse needs.”

In closing, consider this story that Mike shared during the Summit roundtable:

In 1993 we sold a healthcare facility to a major health plan provider for $525 million. At the time we sold it, each facility had a small cafeteria – small in size but it was a big cultural differentiator from our competitors for our Hispanic patients. We are very social and we also bring our families with us when we go to the doctor, and these cafeterias provided a place to talk over coffee during visits. We also were catering to a lower income group and many senior patients, who would order a sandwich, eat half for lunch and save the rest for dinner.

Understanding none of this, the company that bought the business decided they weren’t in the food business and shut the cafeterias down. And that’s when the mass exodus began. Fast forward to 2002, and we bought the business back for $10M – then sold it again two years later for another $525 million.

It was a simple but costly mistake: they forgot to ask the customer what they wanted. They didn’t understand what makes them unique, their thought processes and values. It’s the same unintentional but misguided approach that’s taking place every day at companies across the country, and it’s why leadership must begin to prepare for the cultural demographic shift – or soon find themselves extinct.

Earvin Johnson summed it up with this simple and straightforward message: “I was successful because I didn’t try to create the demand. The demand was already there. You just have to figure out what people want and then over-deliver on it. Do that and they will become your most loyal customers.”

The C-suite needs more African Americans, Hispanics and other minorities because of the hands-on role they can play in defining and guiding a corporate strategy rightly to serve the cultural demographic shift. With a seat at the table, they can help us all listen to our communities more closely and with greater intent, translate their needs into new products and services, and enable brands to authentically engage with those needs that are influenced by their culture. Until we learn to do these things, corporations will continue to miss the opportunities that are right in front of them.

Remember this: Without strategy – change is merely substitution, not evolution.

Leading and driving sustainable growth through the cultural demographic shift is the difference between an organization playing it safe and viewing the shift as just another expense with no real growth opportunities – or real leadership that’s innovative and courageous enough to invest in the shift, redefine their business models, and take ownership for closing the growing opportunity gaps within the three pillars of workplace/workforce; external partnerships; and the all-important marketplace/consumer.

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The cultural demographic shift™ in the United States is about the workplace and marketplace telling us that it is becoming less about the business defining the individual and more about the individual defining the business. This is exactly why Hispanics – both entering the workplace in search of the right employer who will allow them to be their authentic selves as well as those professionals who have been battling the gulf between assimilation and authenticity – are now ready to advance as 21st century leaders by activating their immigrant perspective; that is, the influence their cultural values have on the natural ways they think, act and are motivated to perform at work.