The term “purpose” has risen in business prominence as brands look for ways to connect what they are evaluated for in the short term, with their commitments over longer timeframes.
Nevertheless, there are still many who view this (re)definition of purpose as a feel-good that soft-frames the commercial realities of what businesses are there to do. Additionally, they say, it risks becoming too much of a distraction to the bottom-line responsibilities that organizations should focus on.
Advocates of the more single-minded approach argue that the purpose of business is to make money and that, in doing that, businesses contribute to the efficient functioning of markets through wealth creation and jobs. It is a functional view, centered on the immediate and commercial reasons for being and oriented in its evaluation of success towards results.
In the right hands, this focus on outcomes energizes and drives an organization’s business priorities and strategies. It is an approach that has powered many of the most effective globalization strategies to date. Coke’s drive to put a glass of Coke within arm’s reach of every thirsty person on the planet is reflected in its supply chain policies, in its product development, in its distribution and pricing strategies. That saw the company become the biggest seller of beverages in the world as outlined in this excerpt from their 2013 Annual Report:
The Coca-Cola Company is the world’s largest beverage company. We own or license and market more than 500 non[-]alcoholic beverage brands … We believe our success depends on our ability to connect with consumers by providing them with a wide variety of options to meet their desires, needs and lifestyles. Our success further depends on the ability of our people to execute effectively, every day. Our goal is to use our Company’s assets — our brands, financial strength, [unrivaled] distribution system, global reach, and the talent and strong commitment of our management and associates — to become more competitive and to accelerate growth in a manner that creates value for our shareowners.
It makes good business sense, except when it’s taken to extremes. Then, this functional pursuit of results (especially when accompanied by generous performance incentives) can drive organizations to pursue agendas that are calamitous. The Global Financial Crisis, it could be argued, stemmed from a systemic and constraint-free pursuit of outrageous sales targets at the expense of humanity, responsibility and even common sense. The underpinning attitude of greed and opportunism fueling the bull-rush was fostered and cultivated by cultures who saw their purpose in purely financial terms. The returns justified the means.
There is however another way to view purpose and that is to hold a company’s actions accountable to a broader framework.
An intentional view of purpose sees money more as the means and reflects an increasingly global bias. The purpose of business in this context is to make money and to do good in the world. Or even, to make money by doing good in the world. This linking of agendas is borne out in the business models of companies like Tom’s and Warby Parker who seek not only to sell wares but, at the same time, to solve problems. Warby Parker were inspired to act because they believed glasses were too expensive for most people:
The eyewear industry is dominated by a single company that has been able to keep prices artificially high while reaping huge profits from consumers who have no other options … We believe that buying glasses should be easy and fun … We also believe that everyone has the right to see. Almost one billion people worldwide lack access to glasses, which means that 15% of the world’s population cannot effectively learn or work.
Patagonia, who pledge to “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis” took their commitment to their beliefs one stage further by famously suggesting to their customers “Don’t Buy This Jacket”.
An intentional view of purpose connects what the people inside an organization and the customers who buy from them would like to see change. There is collaboration between seller and buyer based on a shared belief system and worldview. Inherently that supercedes the typical quarterly short-term business horizon.
Such an approach acts as a moral compass for the organization. Its brand, reputation and market share then depend on the brand continuing to do right by that idea. That in turn puts some actions in-purpose and renders others unacceptable even if they meet the requirements of the functional purpose because they do not contribute to the intentional purpose. As Hilton pointed out recently, a strong and clear purpose drives collective comprehension, cohesion and forms the basis for fundamental business choices.
This approach can also go too far.
The pursuit of an ideal is inspiring but unless it is backed up by strong executional strategies and accountabilities and robust management, inefficiencies can become rife and a certain self-righteous narcissism and hubris can begin to permeate the organization. Few buyers wants to be proselytized.
So, Which Way To Go?
Should organizations pursue their functional purpose as a first priority and look to temper that by agreeing on what their intentional purpose is? Or should they set out their intentional purpose and create strategies and operations that aim to get there in time? We wonder why the two interpretations of purpose need to be seen as alternatives. As Peter Drucker once observed, profit is a consequence of business’ first imperative – “to create and keep a customer”, Profit is not the sole objective.
It seems to us that either reading of purpose, functional or intentional, can be detrimental if pursued to its extreme. Instead, by pursuing both interpretations together, each can hold the other in check. The brand can chase its commercial goals at the same time as its lays down clear guidelines, that its customers agree with, about how it will achieve those goals and how the world will benefit as a consequence.
If we return to Coke, the real challenge facing that business across the world is not choosing between whether it should tackle obesity or make money, but rather how it can continue to strike a purposeful balance between a full range of priorities. These include, but are definitely not limited to: responsible returns; advocating for a more balanced approach to consuming calories; and using natural resources like water in sustainable ways. If Coke’s purpose, manifested in their marketing, is ‘Moments of happiness’, the company’s leadership probably need to be asking themselves at least nine ongoing questions in the balanced pursuit of that purpose:
- How do we define a moment? (is it always singular or must it be social?)
- How much is a moment? (is it a gulp, a can or a 2-litre bottle?)
- What’s a moment worth? (if there were less moments, for example, could they be worth more? How?)
- Does the company need more moments? (diversification) What that achieve greater profits or greater happiness or both?
- How is happiness changing across the world? (specific, regional and global trends)
- Who must be happy in order for us to achieve our purpose? (how do we judge success and is that how our consumers judge success?)
- What makes people happy now and what will make them happy in the future?
- Where do the pursuits of happiness fight with each other and how do we resolve them?
- Must a moment always include consumption of our products or could/should we enable other moments?
There Are Far-Reaching Implications In This Balanced Approach For Leaders.
For purpose to realize its full potential, the commercial leadership must align with, and be framed by, a clear and shared moral leadership. That in turn brings an ethical aspect to returns that investors must be happy with. Ironically, as average consumers we want ethically and purposefully-driven organizations, yet as shareholders we want organizations to deliver consistent, above-average returns. Getting this balance right falls to each of us not merely the captains of industry.
There’s no denying this is a complex subject – and one we intend to explore further in upcoming posts. Importantly, as people increasingly demand more ethically-driven leadership from business, it is one that can’t be ignored.
Co-authored with brand strategist Hilton Barbour.
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