The different contexts in which business takes place are becoming increasingly complex and uncertain. Companies are facing the challenge of explaining to their stakeholders the nature of their future business models to gain their confidence. Having a corporate purpose has become a recurring theme in business schools and in management trends’ articles. Evidence includes how many of the world’s fastest-growing companies have a clearly defined purpose.
Fewer people are finding a dichotomy between results orientation and corporate purpose. Conversely, the novelty here is this story has changed quickly from being focused on engagement to providing a company with a competitive edge, demanded by shareholders, investors, the executives and all those who judge whether or not the company has a future. Some authors are starting to call this “the purpose revolution.”
Keys to redefining Corporate Purpose
LLORENTE & CUENCA conducted a qualitative study with the participation of 85 executives from large Spanish companies to understand the impact of this revolution on its organizers and to learn what they consider the keys to redefining and successfully adopting corporate purpose in the business model. The following are the main conclusions we have drawn from this study:
- Redefining corporate purpose: an urgent task. The definition of corporate purpose is of vital importance to shaping a company’s future. It was even observed 81 percent of the executives believe this definition is an urgent task. Although they add that all companies actually have a foundational purpose. In fact, nearly half of the executives stated their companies already have a public purpose that has always been defined, and, if anything, would need to be updated and redefined.
- From past history to future strategy. Corporate purpose is no longer a tool to be used for communications or the brand but a definition of long-term ambition. According to the executives who took part in our study, the critical point is the credibility of the purpose associated with the business model. For this reason, they consider corporate purpose a vitally important part of long term business strategy (they rate it 8.1 out of 10 points) and that it is not an initiative that ends up as a mere brand claim.
- From communications to leadership. Leadership in relation to corporate purpose is one of the keys to making a real difference in the business model, according to 75 percent of the interviewed executives. In the most highly acclaimed companies, such as Google, Tesla and Airbnb, corporate purpose is a tool used by the CEO to inspire the organization and instill confidence in stakeholders. In a practical sense, the executives in our study think Spanish CEOs should make activation of purpose part of their agenda, which is something more frequently seen among American executives.
- From responsibility to commitment. Three out of four executives believe that for purpose to actually affect business, it must orient the company’s focus of sustainability. In this regard, 81 percent of the participants in our study think purpose should be about a human need or a global challenge that goes beyond a company’s policy of corporate social responsibility.
From impact to transformation. Numerous researchers have shown in recent years corporate purpose is an exercise in corporate empathy that helps companies improve organization, retain talent and strengthen bonds with consumers. Of those who took part in our study, 78 percent consider having a clear corporate purpose is profitable and contributes to the company’s business. Specifically, 63 percent of those interviewed believe the main benefit of having a purpose is having an organization that is more aligned and motivated.
Without a doubt, corporate purpose is an indispensable tool for structuring and fine-tuning the story of a business model in times of turbulence. Spanish executives believe having a clearly defined corporate purpose is profitable and contributes to a company’s business.
A Company with a Purpose Is a Company that Makes Sense
All companies have a story they tell through a mission (what they do), a vision (their aspiration) and values (how they carry out said mission). Most companies were created with a sense of purpose; an initial idea of why and to what end they wished to operate in the market, of their impact and contribution.
A purpose is much more than an advertising claim or a social cause. It is a synthesis of a company’s four strategic dimensions: what we are good at, what we get paid to do, what moves us and what the world needs.
During times of change, more and more companies update their purpose to orient their growth strategy toward a leadership challenge associated with improving the quality of human lives.
The 50 fastest-growing brands worldwide in 2018 have a clearly defined purpose, and companies with a clear purpose have achieved 10 times more shareholder value than the average for the S&P500. They also have 1.7 times more satisfied employees and are three times more likely to retain talent.