Purpose-driven organizations are more successful
Pursuing purpose is a crucial success factor for modern organizations. This article explores the relationship between purpose and performance and contains the following sections:
The evidence is undeniable — purpose-driven organizations are more successful
The evidence is undeniable — purpose-driven organizations are more successful
Research shows that purpose-driven organizations are more successful financially and have a stronger impact.
The Harvard Business Review found that when organizations pursued purpose, it helped them "redefine their playing field" and "reshape their value proposition". It did this by allowing them to consider a broader range of solutions for the customers they serve. This resulted in new growth opportunities and the delivery of more comprehensive benefits to customers. Conversely, it helped overcome the challenges of slowing growth and declining profitability.
According to Deloitte, purpose-driven organizations experience higher market share gains and grow three times faster on average than their competitors – while simultaneously achieving higher workforce and customer satisfaction.
Fuse Marketing and Cone/Porter Novelli also found that more than 85% of people born after 1981 would buy products from a purpose-driven organization. Additionally, Nielsen found that 2 in 3 consumers would pay more for products or services from brands that are committed to making a positive social impact.
Historically, non-profits were more driven to fulfill their purpose than for-profits. Many for-profits instead focused on achieving (sometimes aggressive) growth or financial targets. However, balancing this with purpose is an increasingly critical success enabler – especially for gaining a competitive edge.
So, what is purpose?
One way of interpreting purpose is to look into the future and clarify what impact an organization will have. This should answer the question, "Why do we exist?" Consider the methodology below for defining it.
An organization’s mission statement describes how it "fills its need(s)" and achieves its purpose, as reflected in point 2 above. Consider the example below of a fictional battery technology company, Motion Battery Technologies, which pursues modularization of vehicle batteries as a method for speeding up the adoption of electric vehicles (EVs) and mitigating climate change.
Consider the Harvard Business Review research mentioned above as a real-world example. The organizations surveyed adopted impact-driven purposes. For example, Mars Petcare’s "A better world for pets" guided them in developing new products to improve pet health. Their purpose was, therefore, focused on bringing about a positive impact. Additionally, Steve Jobs once said that organizations should focus on bringing positive benefits to customers and not simply pushing a technology (i.e., product or service) onto them.
Purpose is also often targeted towards social, sustainability, or environmental-related themes. Bringing positive change to these themes is an increasingly important success factor, often giving an edge over competition. However, purpose is not restricted to these themes and can be applied to any context as long as positive impact(s) can be identified.
For many organizations*, the primary focus of purpose should, therefore, be delivering positive impact(s) based on the need(s) it fills. If this can be achieved and operations optimized around it, financial performance can be improved, and shareholders will be better rewarded. This means challenging the mindset of pushing products or services simply in pursuit of aggressive financial or growth targets — instead focusing on bringing about positive change.
*While some industries, such as banks and the financial sector, are expected to focus on financial performance, it's essential for all organizations to consider the positive impacts they can bring to their customers and shareholders. This is integral to purpose-driven strategy.
Align the organization to fulfill purpose
An effective strategic planning function is an excellent method for defining and implementing an organization’s purpose. Check out our article on this for more information. All departments, teams, and individuals must be geared towards achieving it. Ultimately, purpose will directly influence an organization's vision and mission and be embedded in its values, which guide internal and external decision-making and actions.
Additionally, research shows that effective strategic planning makes organizations more successful. So, pursuing purpose combined with effective strategic planning is a double-win for organizations.
Maintain sight on purpose
Unfortunately, some organizations can compromise their ability to fulfill a purpose – or worse, fall into a false sense of fulfilling an actual purpose. For example, this can be pursuing aggressive growth targets that restrict the ability to deliver a solution – or deliver it without a significant delay. This can compromise a customer’s ability to overcome the challenge(s) they face. Integrity is crucial. Pursuing genuine relations with those whom you serve – your customers – will build trust, minimize lost resources and time, and increase the chances of bringing about change.
So, does your organization have a clearly defined purpose, and can you use it to guide strategy and operations?