To say that business purpose vs profit is in the news would be an understatement. However, the argument seems to be one of either/or—either shareholder-focused profit as the raison d’être of companies, or stakeholder-focused purpose.
We’d like to posit that the reason a company exists is to deliver both profit and purpose.
It’s not an original idea; in fact, it’s a thought that Ralph Waldo Emerson espoused in the early 19th century: “Doing well is the result of doing good. That's what capitalism is all about.”
So, it appears that this is one of those fortuitous occasions on which we can have our cake and eat it—because it’s possible to see making a profit and serving society as not only compatible, but as two sides of the same coin. How can this be true?
First of all it seems increasingly clear that if a company is not purpose-driven, it is missing out on an important competitive advantage: managing to deeply engage consumers. Millennials, in particular, increasingly make purchasing decisions based on elements far more esoteric than product performance and pricing. They want to know what a company does in society and what it stands for. They're looking beyond the product itself to whether the company aligns with their own beliefs and societal priorities.
In today’s market, a clear purpose is not just a nice thing to have, but a fundamental necessity if you want to stay in the considered set of the consumer.
In recent surveys more than half of consumers claim to be attracted to brands that stand for something bigger than their products and services; brands that line up with the consumers’ personal values. Also, a purpose-driven organization builds into its reputation a cushion in damage control, in the case of unfortunate events that can hurt trust.
Bottom line—profitable companies have customers who actively champion them and want them to succeed because they identify profoundly with consumer ethics, not just because they have great products. Thus, purpose-driven brands make competitive and bottom-line sense.
But how do you create a brilliant, profitable and purpose-driven brand? You can’t just pick a cause and say you’re for it—purpose must be seen to be deeply ingrained into the fabric of the company, and fundamental to everything the company says and does.
You’ll be headed in the right direction with the following 5 steps to craft a brilliant brand purpose and drive profit:
- The basics of your business’s purpose: First take stock—It’s vital to benchmark your reputation and determine exactly what you stand for in the market today, externally and internally. Do the seeds of purpose already exist? Or are you in the red (in terms of purpose and profit)? If the seeds are there, they are precious, and you should cultivate them if they will set down roots deep in the views and values of your customers. Be very quantitative about this—it’s far too important to rely on anecdote. Design quantitative research to deliver a clear understanding, warts and all, of what your company stands for in terms of its social commitments to all stakeholders.
Examine the purpose propositions of competitors to see where the ‘gaps’ are, and spot what purpose propositions will differentiate you authentically. Don’t put lipstick a pig. The rewards of true purpose branding are many, but proclaiming a purpose you don’t live by is a recipe for a PR disaster. Stakeholders include your employees and boards—whatever your purpose is must include fair treatment of them. You want the entire organization to align behind delivering on your stated social goals and imperatives.
- The importance of auditing your business purpose: Communications—Everything communicates. Whatever you discover about your benchmark it’s key to know where your consumer impressions and perceptions originate. Paramount is your corporate behavior—that means everything you say and do to tell consumers what you stand for. Here, actions speak louder than words. In this audit you’ll reveal what you’re saying or doing and the reactions you’re inviting, along with what you must keep, stop or amplify.
- Determine the business purpose your customers want you to stand for—Again, this cannot be anecdotal. In a solid qualitative or quantitative research study, work out what makes your customer franchise tick. What do your customers believe and wish to stand for? What drives their purchase decisions and behaviors? What do they want you to stand for and deliver on? What do they think you’re doing right in this regard? What are you doing wrong or in a way that grates against their belief systems and moral standards? What are you doing right? Your goal is to come out of this research with a profound understanding of the purpose directions you can take. You’ll want to proceed in a way that will enhance customer loyalty, produce repeat purchases and, in turn, grow your profits.
- Audit the business purposes of your direct and indirect competition—Remember that becoming a more profitable, purpose-driven enterprise is an opportunity to create massive differentiation in the category. You may find it challenging or too costly to differentiate on product performance, so committing to a differentiating purpose is economical as well as prudent. You may want to begin with a SWOT analysis to understand where your biggest threats and opportunities are. This particularly helpful in understanding who you directly and indirectly compete with. If you’re an airline, for example, your competition includes rail travel, not just other airlines. If you sell stationery, your competition is digital apps and email. Once you know whom you’re up against, isolate their perceived purposes and map out the landscape—who stands for what? You may find core competitors stand for nothing at all in the purpose stakes. You may find the field cluttered. Whatever you discover, your objective is to find white space and clearly define and own it.
- Identify your unique business purpose—Your purpose strategy must intuitively align with your business goals. You shouldn’t go broke pursuing a purpose—your objective is to make more money, not less. You are now equipped to understand where your purpose strategy currently sits, what would make it highly differentiated and aligned with your customers, and the distance from an ideal manifestation of business purpose to how your company is perceived today. Funnily enough, there may be a purpose strategy already hiding in plain sight, just not yet leveraged. Levi Strauss, for example, uses laser technology to distress their jeans rather than time-consuming and environmentally questionable chemical methods. This also happens to save costs, so there may be a double advantage in building a purpose around what you already do.
Ultimately the data say that becoming a purpose-driven business is an investment, not a cost. Deployed with the right strategy, it will even boost profits and provide a formidable competitive advantage.
Here’s another old idea; this one from Benjamin Franklin. We’d argue that you will, “Do well by doing good.”