Find a Sense of Purpose or Fail


Making Profit Should be a by-product of Purpose
Eight years ago, a global study of high growth in companies was launched by the Harvard Business Review (HBR) to investigate the importance of three strategies known to drive it: creating new markets, serving broader stakeholder needs, and changing the rules of the game. However, the finding of the study was a major surprise, going by the admission of the brains behind the study. Although each of the three strategies did boost growth at the organizations studied, there was a fourth driver that the team had not even considered at all: PURPOSE.
For many years, companies have been urged to make purpose form the core of what drives them. Unfortunately, the conversation has often been around having a purpose as an add-on—a way to create shared value, improve employee morale and commitment, give back to the community, and help the environment. However, as the study by HBR revealed, companies have moved purpose from the periphery of their strategies to their core. This means that such companies have committed leadership and the financial investment to use purpose as a way towards sustained profitable growth; a way to stay relevant in the rapidly changing and unpredictable business world; and, to deepen ties as well as forge meaningful relationships with their stakeholders.
Across the globe, corporate organizations often have very predictable responses whenever they are faced with challenges of dwindling margins, especially in the face of the rapidly commodifying world. It’s always downsizing (what they call rightsizing), or for the slightly smart ones, the go-to response is to enhance their value propositions by innovating products, services, or business models. This explains why a business may start as a Telco but ends up having a financial product as its core business. While this approach of value proposition may bring some quick wins, professor Thomas Malnight of Switzerland’s International Institute for Management Development (IMD) posits in his HBR article that the value proposition approach is only but a “transactional approach geared toward prevailing in the current arena.” Professor Malnight insists that companies must adopt the purpose-driven approach or risk failure because “purpose-driven approach facilitates growth in new ecosystems; it allows companies to broaden their mission, create a holistic value proposition and deliver a lifetime benefits to customers.”
I recently listened to Alex Edmans, a professor of finance at the London Business school, in one of his video interviews on “Inside Global Economy.” Listening to Edmans got me intrigued by the idea of having a purpose-driven business strategy rather than just sticking to the good old Bottom-Line approach. At this point, I would rather quote the professor verbatim rather than paraphrase, and here it goes.
“A key challenge facing global business is its responsibility towards wider society. As a society, we are facing major challenges such as climate change, income inequality, discrimination, and automation. But many businesses focus only on short-term profit, paying scant attention to those wider societal issues. This is a concern that is the force behind populism in the world today. People just do not believe that the current system of capitalism is working for ordinary citizens.
So, the key challenge for businesses is to recognize their responsibility to society while also making sure that they keep an eye on their bottom-line. Businesses, after all, are not charities, and making a profit is an important part of a well-functioning economy.
The question, therefore, is how can businesses prepare?
Businesses can prepare for this challenge by having a clear sense of what their purpose is. So, what is a purpose? A purpose is the business reason for being. A “raison d'être” if you will. A purpose defines the role a business plays in the world and how it contributes to human betterment. A purpose is like a North-star that guides a business in its everyday decision-making. A pharmaceutical company’s purpose might be “to make medicine to transform human health.” Similarly, a gaming company’s purpose might be “to make toys that both educate and entertain children.” Lastly, a telecommunication company’s purpose might be “to use telco services and products in transforming and impacting lives positively.”

Importantly, a business purpose should not be just to make profits. Making profit should be a by-product out of serving your purpose: doing well at making medicine, making the best toys that bring happiness and educate kids, and transforming lives through its amazing telco services and products, et cetera. However, it is not just sufficient to come up with a nice purpose statement. It is important to put it into practice. Any company needs to think about what measures it must have to get to gauge whether it is actually fulfilling its purpose. More importantly, company executives must learn to use such purpose and their corresponding metrics in making decisions and evaluating employees. This is the only way a company can move beyond just short-term profit-making and move into the dynamic world of business with a mind for sustainability.”


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