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Why ‘purpose beyond profit’ creates extraordinary commercial success
Locating your ‘purpose beyond profit’ can lead to extraordinary commercial success for a number of reasons.
Picture ‘brand purpose’ as an evolutionary ladder. When a brand first steps out of the swamp onto dry land, its purpose is to make an immediate profit: buy low, sell high.
Evolve one step further, and brands start to gain a deeper understanding of the customer’s lifestyle, life cycle and core emotional needs. More evolved brands learn how to adapt and invest in customer relationships over the long term, increasing their chances of survival and success.
We think it’s time for brands to evolve another step: to the level of ‘audacious purpose’.
Purpose beyond profit
Audacious purpose slingshots beyond the customer and straight into the brand’s social purpose – not what it makes, but what it makes happen. Audacious purpose creates a powerful lodestar at which to point your business. When you focus on how your core business makes the world a better place, you create a ‘reason to believe’ that will bring customers, employees, suppliers and partners on a journey with you. Audacious purpose creates movements.
This is not about philanthropy or CSR. In fact, the rationale for locating your ‘purpose beyond profit’ could not be more commercial. There is mounting evidence that audacious, game-changing purpose puts the wind behind your sails and creates the conditions for extraordinary commercial success.
Purposeful leaders, sustainable businesses
We’re not alone in thinking this. A 2014 EY survey revealed that 87 per cent of business leaders believe that companies perform better over time if their purpose goes beyond profit.
Unilever CEO Paul Polman is a shining example. He has set the consumer goods giant a clear objective: to double in size while reducing the company’s overall environmental footprint and increasing its positive social impact. In his words: “If you want to exist as a company in the future, you have to go beyond [CSR and philanthropy].You actually have to make a positive contribution.”
“If you want to exist as a company in the future” – these words should make every business leader sit up and take notice. Our experience working with business leaders to create purposeful visions has shown us that CEOs who understand the power of purpose can inspire long-term, deep-rooted confidence in business and brand. It is this purpose-driven confidence that delivers long-term, sustainable commercial success.
Five ways that audacious purpose delivers commercial success
1. Purpose fuels confidence and drives outperformance
Purpose inspires confidence, which in turn fuels investment, innovation and long-term performance. Why? Because organisations with a strong sense of purpose are buoyed by factors beyond the short-term financials.
As Deloitte’s 2014 Culture of Purpose survey showed, a clear purpose creates a longer horizon for positive returns and breeds confidence that your brand can continue to thrive in a shifting landscape. And as Jim Stengel demonstrated in his must-read book Grow, a study of 50,000 brands, purpose-driven brands simply outperform old-fashioned brands.
Again, Unilever is a great example. CEO Paul Polman stopped the practice of quarterly full reporting in order to reduce the temptation to succumb to short-term thinking. This should have been anathema to the markets, but Unilever’s price hit a record high in April 2015.
2. Purpose inspires customers
As author and strategist Simon Sinek says: “people don’t buy what you do, they buy why you do it”.
Consumer behaviour is increasingly rooted in identity, values and emotion. In this world, purpose drives sales. A study by Havas Media Group, Ipsos and GSK has demonstrated a clear positive link between the ‘meaningfulness’ of a brand and its ‘share of wallet’.
That’s why we’ve seen ethical bank Triodos outpace its peers and grow customer accounts 144 per cent in four years; why ethical outdoor clothing firm Patagonia has achieved five consecutive years of double-digit growth; why organic dairy brand Yeo Valley has achieved consistent sales growth and cracked into the top 100 UK food brands.
3. Purpose attracts (and retains) talent
Audacious purpose attracts the best minds and electrifies employee engagement. In our own work helping business leaders to inspire purposeful visions, we’ve seen time and time again how fostering a culture of purpose brings out the extraordinary in employees.
This trend is only set to increase: research consultancy Global Tolerance has found that 62 per cent of UK millennials want to work for an organisation with a positive impact on the world, while 53 per cent said they would work harder if their company benefited society.
4. Purpose attracts investment
Until now the pantomime villain in the purpose story has been “short-term shareholder returns”. But investors are increasingly taking the “triple bottom line” of social, environmental and financial returns into consideration when allocating funds: witness the recent divestments in fossil fuels by institutional investors across Europe.
It’s about more than avoiding harm: the 2015 RBC/CapGemini World Wealth Report found that 92 per cent of high- net-worth individuals (HNWIs) believe that thoughtful investment is an important way to drive social impact, while a 2014 US Trust survey showed that two-thirds of millennial-aged investors with at least $3 million view their investment decisions as “a way to express my social, political or environmental values”.
It’s no wonder that investment banks are scrambling to set up their own impact investing programmes. Shouldn’t your brand be aligned with purposeful investor behaviour?
5. Purpose drives innovation
What would you do if your main product or service were made illegal? It’s a question we sometimes ask our clients to focus minds back on the core purpose of their business and brand.
The germ of the question is about innovation: how else could you achieve your purpose beyond what you currently produce or offer? How can you stay ahead of disruption and outperform the competition? When you understand the ‘why’, new horizons open up to explore the ‘how’ and the ‘what’ in fresh and innovative ways.