Why Purpose Must Underpin Your Transformation Strategy

The global shift towards more purpose-driven business models is on the increase as new realities involving globalisation, digitalisation, environmentalism and geopolitics dominate conversations.

Yet, as business leaders feel the pressure to re-prioritise, the question around their willingness to respond to the changing tide remains.

Research by Harvard Business Review and Ernst & Young found that while an overwhelming majority of business leaders agree that purpose plays a key role in driving performance, less than half say they actually include it to inform strategic and operational decision-making.

The case for a clearly articulated business purpose

Of the 474 companies surveyed, those guided by purpose reported higher revenues and increased market share compared to those that weren’t. The study further asserts that companies with a well-defined purpose had higher employee satisfaction rates and were able to retain top talent within their ranks.

These realities translate into companies being able to build more customer-centric products that, in turn, result in increased customer loyalty and share of wallet. According to the report, companies with a well-defined purpose reported revenue growth of 10% or more over the past three years.

Considering that companies with virtually no articulated purpose reported either stagnating or declining growth over the same period, the case for boardroom level discussions around purpose becomes clear.

“There is an increasing awareness that the purpose of a company has to be beyond shareholder value and that this is not something that will cost your business but something that will enhance your business,” ~ Harvard Business Review

How a leading brand built its operations around its purpose

Car manufacturer, Toyota seems to have had an early start on its competitors when it comes to building a purpose-led organisation. The Toyota Production System, or TPS, was developed around the company’s philosophy, which emphasises continuous improvement, waste reduction and respect for people.

Toyota describes TPS as “…a reminder that lasting gains in productivity and quality are possible whenever and wherever management and employees are united in a commitment to positive change.” It is this well-defined purpose, underpinned by a human-centric philosophy that’s helped Toyota penetrate and dominate new markets in which it was previously an unknown entity.

Interestingly, TPS’ efficacy in helping companies to take a more people-centric stance has resulted in the system being adopted by Toyota’s suppliers, partners and even non-profits looking to increase efficiency as a means to serve people better. Beyond the feel-good factor, the car manufacturer’s board members have had equal reason to laud TPS as Toyota continues to dominate global car sales figures.

How a leading brand built its operations around its purpose

With customer and workforce values fueling the need to change course, C-suites shouldn’t panic about what this means for their bottom lines. Companies like Toyota, Unilever and others have demonstrated the ability to consistently drive profits up while remaining true to their purpose as a brand.

The pharmaceutical giant’s decision to produce great products while minimising the impact on the environment has paid dividends. By letting its purpose guide its decision-making; from sourcing to packaging to new product development, Unilever saw sales figures around its Sustainable Living product range increase by 50% in 2016, which accounted for 60% of its total growth for that year.

Other studies, such as the 2013 report by Deloitte, echos the sentiment that purpose-driven business models can yield bigger profits. An overwhelming majority of respondents correlate larger profit margins, optimism about the future and customer confidence in their brands directly to a well-entrenched business purpose.

Yet, this potential is only realised when business leaders are prepared to engage in the profit v purpose debate. Taking your eye off the money may seem counter-intuitive to the seasoned board member, but you may find your foothold slipping away if you don’t.

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