In this article, I explore the role of Purpose within strategic thinking. Why is "why?", such an essential starting point for any strategic exercise? What is it, why is it so important and what does a strong lived Purpose sense do for an organisation's strategic strength?
Classical strategy is a competition
Classic strategy is based on economic force field analyses, it seeks competitive advantage, an "edge over competition" that allows the company to "win" from its competitors, to emerge stronger itself. The measure of successful strategy in the classical perspective is profitability. More profit, better strategy. One could even argue that this makes strategy and strategy choice the next topic for increasing profits and profitability. No wonder so many strategy documents disappear into the proverbial bottom drawer.
Life force, an alternative interpretation of strategy
Dynamic Strategy starts from a completely different perspective. It starts from the idea that strategy serves to keep a company vibrant, vital. Important then becomes the question: what is it to keep vital? So what do we need to keep vital? This obviously involves execution, form, but it starts with Purpose: a conviction, an idea that the entrepreneur believes will add something to the world. A conviction that must take shape through the business to be started. And that idea, this "entrepreurial reason for being", this Purpose is what drives the entrepreneur. That idea must come alive and as research shows: stay alive[i]. And strategy and choice making therefore serves no other purpose than to "keep alive" that primal idea. Vital, powerful and alive. Vitality is the purpose of strategy formulation. Purpose is always the starting point.
That "entrepreneurial reason for being" for short, PURPOSE initially has nothing to do with making money and making a profit. The lion's share of start-ups start from the question "why am I starting, are we starting this company?". Simon Sinek calls this "the WHY"? That WHY of Sinek[ii], or that PURPOSE of VIBRANT STRATEGY is much broader than economic. Usually, that PURPOSE is social. It focuses on what the entrepreneur wants to add to this world. And the latter is rarely money. Money as in profit is the consequence of a good fulfilment of your PURPOSE, the consequence of a valuable execution of your "entrepreneurial reason for being". In addition, it is means. Means to realise, shape your PURPOSE. But it is never, as Milton Friedman claimed in the 1970s, "the sole purpose of an organisation".
A beautifully impressive example is SHARE's German de PURPOSE. A company with a distinct PURPOSE where it is not about making money but giving money away. Or as they put it themselves:
SHARING is our Mission
Share is based on the 1 + 1 principle. And it is as simple as the name: with every purchase of a product, you do something good for yourself and help someone in need at the same time. Finally, sharing without giving!
A purpose statement describes a company's raison d'être. It illustrates how the company has a positive impact on the people it serves. McKinsey Quarterly, 9 august 2021
SHARE, like NU Company, produces energy bars. They also sell mineral water and personal care products. For every energy bar they sell, they spend a meal for someone struggling to provide for themselves. For every bottle of mineral water they sell, they provide someone with drinking water for a day. One of the founders, Sebastian Stricker, has a background with the United Nations World Food Program. Many SHARE projects are therefore in South America, Africa and Asia. Hence the focus on food, water and hygiene.
Purpose: valuable in multiple ways
The value of Purpose within strategic thinking and action is multifaceted:
1. Purpose is the founder's idea
Nothing is more powerful than the founder's idea. No one personifies Purpose better than the founder. No one has a sharper grasp of what it is all about and what it is all about. His or her thought is what led to the creation and existence of the company. It was he or she who managed to inspire the first employees with their idea. Enticed them to join the adventure. With all that entails: the enthusiasm, the belief, the conviction but also the risks of failure. In that sense, that "entrepreneurial reason for being" provides an enormous anchor, an enormous connection to history. And thus, in the event of sustained success, it constitutes an enormous power forward. After all, this is what it is all about and what it is all for. Many times, that very entrepreneur and his or her idea is the reason why people connect. Is the entrepreneur and his or her idea the driving force behind the whole venture. Idea and person are inseparable. Even when, over time, the idea institutionalises or becomes an aspect of the venture and the entrepreneur fades into the background, the association of idea and entrepreneur remains an ultimately powerful combination. However, the more the entrepreneur fades into the background, the more important it becomes to continue to see, recognise and acknowledge that link between idea and people. Purpose does not stand alone even when the entrepreneur has left us.
2. Purpose gives direction and clarity
The entrepreneurial reason for being is the ultimate answer to the question: what do we stand for, why are we here? In this sense, it expresses what the company is for. A higher Purpose. That gives direction and clarity. It gives direction to the things we do and therefore also to the things we mostly don't do. Because they don't fit our Purpose. With that, one must also have one's Purpose extremely sharp. A too narrow view of Purpose leads to a narrowed perspective on roles and activities. Often, a too narrow Purpose stems from a penchant for concreteness. So concrete that we define Purpose in terms of an appearance. "We run trains" (better we provide mobility). "We run supermarkets" (better we provide food and drink). "We sell running shoes" (better: we keep you fit). A too narrow expression of Purpose too quickly excludes alternative c.q. competitors. Because if your Purpose is: trains drive, then the car is not a competitor. And if your Purpose is: we roast coffee beans, then Starbucks is not a competitor. And so there are many examples of companies looking too narrowly. And are surprised by parties they didn't actually count as part of their competitive field. Just imagine the they had said at PTTPOST: our Purpose is to deliver letters. Then and never would have come a POST.NL.
But the reverse is also true. A Purpose that is too abstract does not delineate, leaves too much space and thus gives too little direction. Imagine if Ikea were to say convenience (not entirely unthinkable given the high DIY content of their furniture). So then within convenience fits a moving service. A la, we can talk about it. But convenience also means taking the kids to nursery, washing my car and mowing the garden. Hold on. Chance-free. Or imagine if they at Douwe Egberts were to say: sociability is our Purpose (if you look at advertising history, not entirely unthinkable either). Nice abstract value. But where does it end. Douwe Egberts restaurants? Ho on. Douwe Egberts neighbourhood party? Not so crazy, especially if it's linked to coffee. You can see a thin line.
This is why naming the Purpose, especially if the entrepreneur is no longer on board - as he can usually explain it - is also so difficult. It is a "balancing act" between higher aspirations and concrete fulfilment. Higher aspirations tend to be too vague, too broad, too lacking in direction. Concrete form makes a Purpose tangible but thereby also depends on the relevance of that form over time. And one thing we know for sure, form always ages. That "balancing act" is the great challenge in formulating a company's Purpose. And actually, formulate is a bit of an odd word in this context. It suggests that you could formulate a Purpose "after the fact". Of course, that is not the case. Particularly not if that Purpose exercise takes place detached from any historical awareness. You don't formulate a Purpose, you live it. Every time again. It is a continuum from a historical point of departure. Just imagine if NIKE's new Marketing Director started a project to formulate NIKE's Purpose. A completely pointless and disrespectful exercise. Let's ask Phil!
3. Purpose connects and motivates
People identify with Purpose. It gives life meaning. A good Purpose is what you want to contribute to. Purpose motivates. Purpose connects. Take FAIRMENT, a German start-up that produces fermented food from conviction as an example. There, the Purpose is connected one-to-one with the founders. Their vision, their philosophy of life. That outspoken conviction gives direction. But above all, it connects people. All employees work at FAIRMENT because of its outspoken conviction. They relate to it. They live by it. It's not just a motto, it's a conviction they identify with, which they are passionate about and want to work towards. It motivates. Just like at SHARE. The Purpose connects and motivates. Because it is genuinely lived and found worthwhile. In this sense, Purpose also filters. Because if you have nothing to do with it, you probably won't want to work there and you probably won't become a client. In a world where economically we are increasingly reaching the limits of the taxability of our eco-system, we also observe that younger generations are increasingly showing interest in companies with a deeper Purpose. Of course, making money is part of it, but what makes a company special and attractive is increasingly a genuine and broader than "money-making-oriented" Purpose.
In conclusion - a critical note
Purpose thinking has gained tremendous popularity in recent years. Unfortunately, this leads to a dilution of the idea. Purpose dilutes into social/socially good and responsible doing, we look for an (commercially) interesting purpose and we literally "add" it to our palette of business management and marketing tools. In doing so, the real strategic value of Purpose is lost and it becomes the plaything of the marketing and PR department.
And if that is your expectation - that Purpose can simply be added to the business mix - then I have to disappoint you. A superficial approach to purpose does not work. Indeed, a superficial handling of the Purpose idea can actually do considerable damage, exposing your company to accusations of dishonesty, superficiality and "purpose-washing". It can deter or even scare away customers, and among employees from high to low in your organisation, it will have a negative effect on bonding, motivation and behaviour.
[i] Research shows that 59% of all entrepreneurs see "Business continuity, keeping the business running" as the top priority (59%).
[ii] Simon Sinek, Start with WHY?, 2009