Phil’s Corner: The Purpose of Business
Having spent my last entry in this series talking about the role purpose plays in our personal lives (through the lens of my own experiences), I want to pivot to the role it plays in organizations and enterprises. In the subsequent entry, I’ll talk about how a business’s purpose can be brought to life in a way that is visible to the customers, shareholders, employees, and surrounding community with which the business operates, and how this can be critical to the business growing and prospering.
While I don’t personally agree with the U.S. Supreme Court’s Citizen’s United ruling that “corporations are people,” I would say that companies take on the spirit of their founders and of those who drive them forward. There is a founding premise for the business that typically goes beyond making money – a desire to serve someone, to solve a problem, or to create opportunity for customers or others in the community. The same is true of individual brands or products – they materialize for a reason as if, like humans, they are born with a calling they are trying to fulfill.
I am just one of many who have written about the importance of purpose in making one’s life fulfilling and in driving human happiness. What is clear in recent years is the extent to which this thinking has begun to also cross over into the business world. I believe that we have reached a point where any business that hopes to grow and prosper over the long-run needs to stand for something beyond shareholder wealth – i.e. it needs a higher purpose. It needs to exist for a clear reason, and imbedded in that purpose is the idea of serving someone or some group, of making some kind of difference – big or small. Shareholder wealth can then be a natural outgrowth of that purpose.
By “making a difference,” I don’t mean every organization needs to define its mission around saving the world. Not every company is here to solve world hunger or avert climate change. For a coffee retailer, it may be about having a better cup of coffee that gives a lift to someone struggling to make it through their day. For a design company, it may be about bringing beauty to a workplace or home. Just as humans have no choice, really, but to strive to be the best version of their true selves possible, so is this the case for companies, brands, products, or services. We work best when we are ourselves, and we each play a unique role in making life better on this planet.
A clear definition of a business’s purpose can provide a filter for evaluating various new strategic directions. Would pursuing this new market be true to who we are and to our mission? Of course, it is important to assess market dynamics, understand emerging customer needs, and evaluate where we fit relative to other companies with similar offerings. But I have come to believe that the starting point for any thoughtful strategic exploration is purpose. It provides the foundation, and the super-filter for guiding us through a turbulent world.
In recent years, I have found that bringing attention to the notion of purpose in our consulting work has led to surprising and incredibly positive outcomes for the companies we are here to serve. For one client who was undergoing a major public relations crisis, articulating the original implicit, but unspoken, company purpose gave inspiration to a new strategic direction for the company that has helped the company navigate that crisis and move toward a more sustainably prosperous future. For another client who asked for assistance in evaluating a new potential line of business to enter, sharpening the definition of the company mission gave new salience to pursue that direction, significantly revamping its business model, and developing a rallying cry that is now attracting talent, new customers, and new partnerships, while making the company the undisputed leader of a newly redefined industry. In the world of brands, we have found that exploring the original roots and intent of the brand – who it was meant to serve, what was in its DNA or spirit – can be a powerful catalyst for driving new innovation, renovation, and growth.
Researchers and marketers have been exploring and writing about the link between purpose and company performance for decades. Fast Company briefly touched on the topic last year, referencing Kotler and Heskett’s findings in their book, Corporate Culture and Performance, that the stock prices of purpose and value-driven companies outperform their counterparts by a factor of 12. And, as one of the most popular business books of all time – Built to Last – captured, “visionary” companies, companies with a purpose beyond profit, consistently outperformed the market. More recently, a survey from Harvard Business Review Analytics, sponsored by EY Beacon Institute and titled “The Business Case for Purpose”, found that over 80% of the 474 executives surveyed in the global study believe that purpose matters to employee satisfaction, a company’s ability to transform and customer loyalty.
However, purpose isn’t a constant – “set it and forget it” facet – in any organization. Building on a theme I wrote about in my last entry in this series, a company, brand, or product’s purpose often gets lost over time (just as happens with humans), distracted by marketplace pressures or by the attraction of becoming something new and different. Like humans, in “mid-life” a company can become unmoored, devoid of a clear calling or focus, and, as a result, vulnerable to the vicissitudes that arise from changing market conditions and the constant turbulence of the world around us. A company’s purpose also evolves over time, and takes on the form of sub-purposes that address shorter-term pressures and requirements.
That said, for companies to prosper and grow sustainably, they need to stand for something higher and tap into that original spirit that led them to exist in the first place. Just as I offered the suggestion for humans of a regular visit to their Younger Self, that person who at an early age had dreams and visions of his or her calling in the world, that same retrospection and visit to the business’s origins can be hugely valuable in reminding us of the business’s roots and purpose. Recapturing, continually sharpening, and bringing to life in as authentic a way as possible the business’s purpose can be the key to defining a differentiated and valued role in the marketplace, no matter what crazy dynamics we may encounter as time passes.