Today’s business environment is being profoundly disrupted. Volatile markets, rapid technological advances and unexpected sources of competition are ingredients in a boiling, roiling stew of threats and opportunities, and leaders the world over are struggling to navigate this shifting landscape. Transformation is not enough. Transcendence is the new game.
At EY Beacon Institute, we have found that a clearly articulated, integrated purpose helps organizations survive and thrive. Through our research, discussion with business leaders and surveys of global executives, we have seen the ways purpose can clarify strategy and guide organizations through disruption. Some examples:
- Purpose helps organizations navigate uncertainty. As Helena Norrman, Ericsson Chief Marketing Officer, told us, their purpose helps give her company a line of sight to the future. Although the scope of the change facing the Swedish telecommunications giant is so vast it is impossible for employees to be aware of all that is happening, a sense of common purpose helps keep them heading in the same direction. Ericsson is by no means unique in this regard. In a global survey from EY Beacon Institute and Harvard Business Review Analytic Services, 62% of respondents from purposeful companies described their businesses as focused on innovation and continuous transformation, compared with only 26% from those without a well-articulated purpose. (Find out more in The Business Case for Purpose.)
- Purpose encourages long-term thinking. Having a strong purpose can hone your strategic response. Rather than focusing myopically on hitting the numbers for the financial quarter, purpose can keep organizations focused on driving longer term, sustainable value. A large US convenience store chain took a bold stand when it decided to stop selling cigarettes because, according to its CEO, “Put simply, the sale of tobacco products is inconsistent with our purpose.” That decision meant forgoing an eye-popping US$2b in annual sales. But their purpose of helping people on the path to better health drove their strategy and authentic customer experience as a pharmacy and health care provider of convenient clinics. “It’s an inside-out strategy rather than outside-in; you don’t just look at where the opportunities are and where you could make a lot of money as a way to decide where you ought to be. You decide where you want to be strategically on the basis of what you want to do,” Michael Beer, Cahners-Rabb Professor of Business Administration, Emeritus, at the Harvard Business School, explained.
- Purpose simplifies day-to-day management. By encouraging company leaders to focus on the horizon, purpose helps them consider their internal systems holistically — a habit that suits today’s flatter, more diverse and intrapreneurial organizations. Automattic, for example, the global company behind the WordPress blogging platform and other publishing tools, tries to concentrate entirely on client-focused work, eliminating the need for what cofounder Matt Mullenweg calls “metawork,” such as hours on the clock, employee locations and managers.
So, where will your purpose lead you? That depends on how well you — and all your stakeholders — understand it.
The good news is that even if you can’t define it right away, it’s probably just misplaced. Deep down, there is almost certainly a nonfinancial reason your company is in business, and you and many of your employees probably already know what the world needs from your organization. The first challenge is to change that understanding from subconscious to conscious, and the second, to start matching this ideal with your company’s everyday behavior. Purpose is a way of being, not a tag line.