Purposeful Organisations

Organisations that lack purpose beyond profit will not survive.

By July 3, 2017 No Comments

This article introduces the argument as to why organisations that lack a “purpose beyond profit” are not going to survive the digital age and is a continuation from “if you shared my last post you might be the next larry page

First let’s set some context.  The argument that purpose driven organisations outperform those that focus on profit is nothing new.  Think about the products you enjoyed in the 80’s and 90’s.  The majority were probably produced by companies that had found a deeper purpose than profit.   Some of my favourites include Virgin Atlantic, Ikea, South West Airlines and Starbucks.  Now consider the competitors in these industries who you avoided when and where ever possible. Did they have an obvious purpose beyond money?

 

But back then it was easier.  Profit focused companies might not succeed in building amazing products and services, but they were still able to survive for long periods by working the numbers.  Revenue growth through acquisition, cost reduction through functionalisation and/or outsourcing, incremental product development and large marketing budgets.  Barriers were high and opportunities could be ignored with limited downside risk.

The technological revolution or what the World Economic Forum calls the “4th Industrial Revolution” changes everything.

Consider: –

1.The average S&P500 company lifespan has already dropped from 67 years in the 1920’s to 15 years today.

2. Numerous business leaders are predicting this trend will continue.  Salim Ismail, author of the excellent “Exponential Organisations” suggests that “40% of today’s S&P500 companies will disappear within the next 10 years”.­

The prediction makes a lot of sense when you consider how technological advancement is happening at a faster rate than any point in our history and that these technologies are more accessible to people than ever before.

Literally, the opportunity to develop new products and services is now exponential with millions and millions of people having access to incredible technologies to solve problems in new and novel ways.

The threat to incumbents has therefore shifted away from “keeping up with the Joneses” (similar incumbents) to a start-up (that they have never heard of), that uses a technology (which they don’t understand), to solve a problem (which they didn’t know their customer had).

The majority of CEO’s I speak to are aware of this but only a few have understood that the only way to compete is by redefining their purpose beyond profit.

Consider this simple example:

Company A makes fridges.  Their mission statement is “to supply quality appliances for the home”.  They have built a strong brand, operate globally and have investors who expect improved margin and regular dividend payments.

Company B’s purpose is to ‘sustain life by improving food preservation’.  They are passionate about using biotech to solve food spoilage issues globally.

Which company is more likely to embrace microbial technologies that means the fridge is no longer required to preserve food?

In theory, Company A could take the leap to find a purpose like Company B, but of course getting an incumbent to shift course is about as easy as changing the direction of a tanker with a pair of flippers.  The reality is that most legacy incumbents will find it difficult to rediscover a purpose beyond money.  This leaves those that have one, typically the start-ups,  a free runway to create the products and services of the future.

In my last article I wrote about how difficult it is for people to take ‘action decisions’ even when the potential benefit is large and the risks are low.  I described how emotion is core to our decision making process and proposed that if organisations want to make better decisions then they should focus on just one thing……

That thing is obviously purpose, but not any old purpose.  A purpose that goes beyond money and is unashamedly altruistic as at the centre is a desire to benefit people.

 

Purposeful organisations succeed because they create the emotional environment that allows their employees to take great decisions both big and small no matter where they sit in seniority.  (I’ll explore this with examples in future articles and posts)

I think taking a decision to build a more purpose based company is a ‘click click’ type decision.  The evidence points towards a potentially significant upside, but more importantly, the downside risk of not making the change is now existential.  Technology has changed the business landscape and for incumbents to continue using yesterdays rules is surely madness?

If you work for an organisation or know of one that you believe has a authentic purpose beyond money please post a comment.  I’m particularly interested to learn about purpose led companies that operate in Africa.

 Coming soon…..”why authentic purpose eats strategy and culture for breakfast”….or….”Good CEO’s deserve to be paid $’mill’s ~ the problem is the definition of a good CEO” (shout if you have a preference!)

Colin

Author Colin

The business models that made organisations successful are now becoming their biggest threat in an exponential world. I help incumbents understand these threats and more importantly the changes they need to take to survive and thrive the 4th industrial revolution.

More posts by Colin

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