5 minute read 28 Mar 2018
crowd people releasing chinese lanterns night

Why purpose can be your foundation for reputation and growth

By

EY Beacon Institute

EY Beacon Institute supports and advises businesses on how to place purpose at the heart of their strategy.

Inspiring companies to build a better working world through our research and insights and by creating connections among our community of purpose-led business leaders.

5 minute read 28 Mar 2018

It’s not enough for entrepreneurs to know why they started their business. The world at large needs to understand the bigger reason.

Purpose and entrepreneurship are inextricably entwined. Why? Because in the very act of starting a business, an entrepreneur expresses their sense of purpose. Usually, that purpose will be an attempt to solve a pressing problem, seize a new market opportunity or bring a fresh perspective to a tired process or product.

That’s a thought echoed by business leaders who clearly embrace and embody the entrepreneurial spirit. Addressing the inaugural EY Beacon Institute event in January 2015, Sir Richard Branson, the founder of Virgin Group, observed: “I think anybody who sets up a business sets it up with a purpose. I think just being in business itself, you’re almost definitely creating something to make a difference to other people’s lives. Otherwise, you won’t have a successful business."

I think anybody who sets up a business sets it up with a purpose. I think just being in business itself, you’re almost definitely creating something to make a difference to other people’s lives. Otherwise, you won’t have a successful business.
Richard Branson
Founder, Virgin Group

Making a difference in other people’s lives is at the heart of how we think about purpose at the EY Beacon Institute. We define purpose as “an aspirational reason for being that is grounded in humanity and inspires a call to action.”

It is not enough for an entrepreneur to simply know what their purpose is, however. The purpose needs to be authentic to the business, and the entrepreneur needs to be able to articulate that purpose to customers, employees and other stakeholders. Perhaps more importantly, companies need to manifest their purpose — through decisions and actions — on a consistent basis. With the proliferation of information and instant communications in todays’ world, the public is quick to spot discrepancies between what a company says and what it does, with potentially damaging consequences when there is a gap between aspiration and reality.

Entrepreneurs are increasingly tapping into their sense of purpose to enhance their businesses’ reputations. They want the world to know that while they value a healthy bottom line, profit is a positive by-product of what they do, not the only reason for doing it.

Research by the EY Beacon Institute in association with Oxford Saïd Business School, found that today’s pioneering business leaders use language that links their organization’s strategy for innovation and renewal with “contributing to addressing significant challenges — or providing for human well-being in ways that go beyond product lines and traditional competition.”

Many recent EY World Entrepreneur of the Year program winners are excellent examples of how connecting with a purpose can create businesses with strong reputations and outstanding results.

Consider the example of Belgian entrepreneur Luc Bertrand. He is CEO of Ackermans & van Haaren (AvH), an infrastructure and investment group, and Chairman of DEME Group, a multi-billion-dollar provider of marine-dredging solutions. He used his sense of environmental purpose to bring strategic clarity and reputational integrity to his businesses, by emphasizing the need for a balance between economic development and ecological impact. His simple argument is this: “The basic drive of the company should be the creation of a better world for future generations.”

The basic drive of the company should be the creation of a better world for future generations.
Luc Bertrand,
Ackermans & van Haaren (AvH)

A clear idea that resonates not only with the employees but with all the stakeholders can make all the difference. Take Japan’s Nobumasa Tsutsui, a winner of EY’s Global Entrepreneur of the Year program. His company’s motto is “to save as many lives as possible.”

When Nobumasa learned that his nine-year-old daughter Yoshimi would not be cured of her heart disease, he decided to try to help her himself. Ignoring his lack of a medical background, Nobumasa and his wife began to research ways to create an artificial heart to try to save their daughter and others with similar heart-related issues. Ultimately, he founded medical device manufacturer Tokai Medical Products, which remains inspired by his daughter’s memory.

Connect with purpose to achieve business success

Unfortunately, companies with this degree of clarity about their purpose are exceptional. In a study we undertook with Harvard Business Review Analytic Services: The Business Case for Purpose, we found that nearly half of executives surveyed (48%) thought their purpose was understood better in some areas of the company than in others, while 13% said it was neither well understood nor clearly communicated.

This is unfortunate, because our research has also revealed multiple benefits of purpose for businesses. Through our work for The state of the debate on purpose in business, the EY Beacon Institute identified five ways in which businesses can use purpose to drive organizational success:

  • Instill strategic clarity
  • Channel innovation
  • Act as a force for transformation
  • Create alliances with partners
  • Engage stakeholders by tapping into a universal human need

Perhaps the most persuasive result though, is that businesses that prioritize purpose simply perform better. According to The Business Case for Purpose, 58% of respondents that prioritized purpose experienced growth of 10% or more over the past three years. Just 51% of companies developing purpose experienced the same amount of growth, compared with only 42% that were without a clear purpose.

Hand laying bricks

Purpose is a building block

According to the 2015 Global Entrepreneurship Monitor, 100 million businesses are launched around the world every single year. That is a staggering amount. Purposeful entrepreneurs will undoubtedly have launched most of those businesses, yet very few of them will ever go on to scale their businesses or build powerful reputations in their industry. There will be a host of reasons why this is the case, but among them will be their inability to channel their purpose effectively.

A clear purpose, based on human values — that is authentic and consistent with businesses’ actions — is a foundation stone upon which reputation and performance can be built. Spending the time to get their purpose right will serve entrepreneurs well as they grow.

Summary

Given all the benefits a well-defined purpose can bring, entrepreneurs just starting out should take the time to get theirs right.

About this article

By

EY Beacon Institute

EY Beacon Institute supports and advises businesses on how to place purpose at the heart of their strategy.

Inspiring companies to build a better working world through our research and insights and by creating connections among our community of purpose-led business leaders.