Profiting with a Purpose
Rick Warren, Jim Collins
and others have made the case quite successfully, based on book sales alone,
that a purpose in life and business is essential to achieve true success.
Of course, that success goes beyond corporate profits or personal riches,
although there certainly is nothing to suggest that they are mutually exclusive.
"If
you build a business solely to make money, that is a recipe for failure," John
Moore, a marketing consultant who has worked at Starbucks and Whole Foods,
told the Austin American-Statesman.
Mr.
Moore cited Linens ‘n Things and Circuit City as two companies that operated
without a purpose beyond the balance sheet right up until they closed all
their stores and liquidated inventory.
Whole
Foods CEO John Mackey is among the most well known proponents of purpose-driven
business.
Mr.
Mackey, according to the American-Statesman, told a college commencement
audience,
"Just like individual people by following their hearts can discover
their own deeper sense of purpose, so can the business enterprise."
Julie
Irwin, a professor at the University of Texas, said the purpose Mr. Mackey
speaks about is simply market positioning.
"Having
purpose is just a sharpening mechanism for helping you figure out what
you do and don’t do," she said.
Not
everyone believes that having a purpose is a guarantee of success nor is
an apparent lack of purpose a sign of imminent failure. Tim Calkins, a
marketing professor at Northwestern University, told the American-Statesman that
Starbucks and Dunkin’ Donuts provide a case in point.
Starbucks,
he said, clearly has a purpose but is struggling while Dunkin’ Donuts is
about selling donuts and coffee and it is doing that quite well despite
the recession.
"For
some companies, (purpose) is very powerful and can help them as a way to
compete," Prof. Calkins said. "For other companies, it’s less
about how they compete in the market and more about how they motivate employees
internally."
Discussion Questions:
Is a purpose-driven company more likely to succeed than one whose purpose
doesn’t go beyond the balance sheet? Which company in retailing do you
think is the most successful purpose-driven company and why?
Having a purpose as a company is another way of saying that you have a genuine mission, not just a “mission statement.” It implies that every element of your strategy, from merchandise content (if you’re a retailer) to customer service and marketing, is consistently focused on the execution of that mission. The “purpose-driven” company has a better chance of moving its consumers–and its own associates–from mere satisfaction to commitment, and to a heightened state of loyalty to the brand.
Absolutely. A purpose driven company will have more loyal employees. People are the most important asset to your business. If you’re not purpose driven, customer service is nonexistent or very poor. Attitudes are lax and your mission is apparent. Purpose-driven companies care about their people; they take care of them and are family oriented. Companies in Jim Collins’ book “Good to Great” are good examples of purpose-driven companies.
Let’s ask the question another way: does anyone think of Wal-Mart; Microsoft; Oracle; etc. as purpose-driven companies?
Calling it “purpose” or “mission” or anything else is the soft stuff that must be done to create an identity for the market, the employees, and management. It is essential and while it need not be a spiritual calling, it does have to have a passion and a zealousness to it for it to be effective. Referring to it as a purpose is new terminology for an old concept. Nothing inherently wrong with doing that–but it is not an innovative thought. It is one that deserves some highlighting though as the economy tightens and competition increases.
In terms of which retailer does it best–Walmart. They fulfill the “purpose” or “mission” of providing a one-stop shopping experience at dependably low prices better than anyone else.
I think there are several purpose driven companies and most are doing quite well. Don’t go by stock price on Wall Street to determine success. Wall Street is like using Vegas odds to determine the success of a sports team when the win-loss column is the real barometer.
Starbucks is a good example but unfortunately they are selling a product, coffee, which many people can get for free. Their heart is in the right place but their product is obsolete. Whole Foods and Harley Davidson are good examples. Wall Street has not been kind to them but they both have created a “way of life” for countless Americans. And both are still very profitable and successful, especially compared to their peers.
Purpose-driven business is essential for success, provided the company or the brand enjoys a relevant “purpose.” The example of Starbucks saddens me, mostly because I’m a huge admirer of Starbucks, not to mention that I’m also a Starbucks addict, but for many years Starbucks drove its business through its purpose rather than to be in business just because it’s “in” business.
David Zahn makes a great point this morning–and Ryan is pointed in his message as well. It all depends on how you define “purpose.” If the purpose referred to is a higher calling, as in Rick Warren’s ‘A Purpose Driven Life’ then the answer is “no”–companies do not have to have that to succeed. If the purpose is a focus–a true “mission”–then yes, that is essential.
Microsoft and Walmart have a very clear purpose driving them. They simply want to be the best at something and do it better than anyone else. It doesn’t really matter too much what that something is as long as it is relevant to your customer base, and that holds for both B2B and B2C companies equally.
What does matter tremendously is that a) everyone in the company very clearly understand what your “something” is, and b) everyone in the company very clearly understands how achieving that something benefits them.
Can’t the purpose be profit? SBUX does a great job of saving the environment, merchandising CDs and coffee makers and buying non-embargoed coffee beans, but are they doing anything for me? Dunkin’ Donuts is giving me value. I think that is a more important purpose for retailers now. It’s not impossible to get your staff on board with wanting to make profit.
I want to pose a scenario to the reader: SBUX is closing locations resulting in job losses. Let’s say they decided not to focus on getting exclusive recording contracts with artists and decided to spend that money (and it’s a lot) on labor or making their products a little cheaper? Could those job losses be reduced or eliminated?
Purpose in retail is margin and profit. Yeah it’s nice to help Juan Valdez and his buddies but there is a business to run here and the barrista that is getting kicked out of his or her apartment doesn’t care about the rain forest or trade embargoes.
Who does it right? Trader Joe’s. It all comes back to them. Save the environment and make a few bucks at the same time. Nothing wrong with that.
Gee, I’m feeling all warm and fuzzy inside from all this purpose-driven chatter.
Let’s make it a little less philosophical BS and a little more practical. A business mission and a good, strong business plan is a purpose. Those who follow them are more likely to succeed than those who don’t. A good example of the latter were the first wave of Internet companies in the late 90s. It was greed as a purpose and they paid for it with failure. Funny thing is, these kinds of companies are still cropping up.
Offer a good product, high levels of customer service, reasonable prices for what you offer and treat people decently–that’s the purpose.
I think the word “purpose” is being confused with the word “philosophy.” After all, the purpose of any company is to make a profit by providing goods and services people are willing to pay for. In this regard, Dukun’ Donuts works, while Starbucks does not. The reason is clear enough that I don’t even need to go into it.
A company’s philosophy is what I believe plays a big part in its success beyond the balance sheets. Marketing, customer service, philanthropy, community integration, environmental responsibility, and social awareness are just a few things that businesses should understand and make part of their daily mantra.
Will these ideas please short-sighted shareholders? Probably not. Will they have a long-term positive impact on the balance sheet? What do you think?
Let’s be honest, the stuff of many business books is just “stuff.” “Good to Great”…the business landscape is littered with corpses who took spin to a new level. If you’re stupid enough to think the mission statement/purpose espoused by companies is reality; reread most any purpose–like Enron’s “All business dealings are to be open and fair.”
Make money, treat employees well so they can treat your customers well, don’t believe your PR–you’ll do great.
I highly doubt all successful companies have missions or a purpose they follow. There’s more to it than a mission statement nobody remembers.
Secondly, I highly doubt all companies who have solid purposes do well.
Claims in the article seem like classic text book fodder. Good for 20 year old students to learn; non-factors in real life business.
There are a lot more important variables in the mix for successful companies than mission statements.
Purpose-driven is another way to say “makes a difference.” That difference must be meaningful to customers as well as employees and other stakeholders. Seeking only to profit is NOT enough in a world where people have so many choices and word-of-mouth (word-of-mouse) can help or hurt a brand. For the bottom line, it’s important for companies to stand for something and make a difference. Wal-Mart’s environmental activism now makes a difference beyond profit.
“Providing ordinary consumers the opportunity to buy the kind of things rich people buy” or now “providing items to raise the standard of living for consumers everywhere” are the goals of a famous company. Is that purpose-driven marketing or profit-oriented marketing?
How altruistic does a purpose have to be to make it count as a purpose? Who says Dunkin’ Donuts doesn’t have a purpose: to provide people with a quick cup of good, fresh coffee and donuts or is that not an altruistic purpose so it doesn’t count?
The reality is, companies need to have more than one purpose. If the company is a publicly traded company, its primary purpose is that it must be profitable, and provide a return to its shareholders. In addition, to keep employees focused and happy, the company has to have a greater purpose. This greater purpose might be to do good for the community, or provide “better for you” products, or simply be more ethical in the way it does business. A greater purpose helps keep the employees motivated.
What is extremely important is to make certain that whatever the purpose of the company might be, it can’t be decided top down, and still be expected to have success. While companies can’t necessarily operate as democracies, it is best if the employees themselves help dictate what the purpose of the company should be. Once you have buy-in from the employees, and the employees are able to communicate the purpose on a daily basis, you will have a better chance of gaining buy-in from the customers.
Only then does the company have true purpose that matters.
Whether there are causal links and what those causal links are in the hypothetical chain between business strategy and measurable economic or non-economic outcomes have never been established with any scientific (even social scientific) credibility. The best work in this field remains the work that relates economic outcomes to economic principles and grounds them both in sound, empirical research. I can’t recall a single work published for the general business reader that meets this standard. Can you?
The opening sentence of Rick Warren’s book, while simple, may be the best since “It was the best of times, it was the worst of times.” Rick begins; “It’s not about you.” Powerful.
While Pastor Rick’s intention relates completely to the Godly purpose in each of us, think about that statement in relation to business. If it’s not about you; who is it or what is it about? In answering that question, it would seem to me, that purpose is defined.
Yet purpose alone doesn’t necessarily create passion. Yet, it would seem to me that without purpose, failure is certain. From the outside, we often speculate on purpose but we just might not be sure. Further, purpose and market have to come together at a level to be profitable for the purpose to be fulfilled. We know the companies where this matches up. That’s easy. But we also see those where the purpose and the market lose balance and therein lies the challenge. Starbucks is a case in point as mentioned. Purpose can change, but never at its core. Managing the edges that can, mark success.
One of the better discussions in quite some time. Enjoyed the perspectives thoroughly.
This really is about focus and core competencies. Companies need to know their focus, how this impacts their core competencies (i.e. what they are good at) and to concentrate on these. Ignoring either of these is the recipe for disaster that continually becomes a factor in business failures as businesses “stray off course” or lose this focus. This means establishing a dynamic mission statement and mission which has a sense of “purpose” for all of your employees to embrace, focus on and implement throughout the organization.
From a small retail perspective, I’d like to change out ‘purpose-driven’ for passion. Among the most successful smaller and independent retailers, in many cases the defining characteristic is the passion that the entrepreneur brings to their business. This passion is shared by and reinforces their employees, and is the organizing principle behind the community of loyal customers that these retailers develop.
As we go forward, and as smaller and independent retailers seek to carve out their own distinct niche, this passion will lead to the building of strong, durable customer relationships, and sustained success.
One of the shocking things about Warren Buffett’s own business management, is his determined disavowal of plans. I’m sure that doesn’t work all the way to the bottom of the conglomerate, but he has honed investment skills to respond to opportunities as they appear. He says something like if you are looking to bag rare white rhinos, you must always be ready, and carry a loaded gun.
I suppose this could be characterized as a “purpose driven” business, if you define the purpose as growing your assets by being ready to respond rationally to the environment.
But it has been argued that people are psychocybernetic animals, that function best when there is a goal being striven for. This is the only model that works for me personally. Years ago a mentor told me to do something every day, that would be of value to me five years from now. This has led me to habitually have “five years from now” in my sights.
OK, the reason most people achieve so little is because they forget what it was they were going to do. Your psychocybernetic mind and body cannot deliver results on a ceaselessly shifting target. Write it down!!! The faintest ink is stronger than the strongest memory. ‘Nuff said. 🙂
Someone wise once wrote: we need to break away from the tyranny of “or.” Having a purpose beyond making money, and making money are not two diametrically opposite directions for a business.
Focusing only on profits gives us scenarios such as we’ve had with the banks in the last year. There is no end to greed, and a business that is solely focused on increasing its own revenues and profits essentially becomes a dysfunctional member of civil society.
On the other hand, a business that is not focusing on making profits and only follows some other higher calling is on the expressway to the business graveyard, taking the higher purpose along with it.
I think the principle of enlightened self-interest works for businesses as well as it does for individuals.
Having a purpose is great, however, if your customers aren’t compelled to buy your stuff, the greatest, most relevant purpose quickly becomes irrelevant.