Is purpose the vital access to performance and the starting point of strategy?
What explains the variability in performance – revenues, profits, share prices – across firms who compete in the same industry? Why, for example, does IKEA do so well in the furniture industry when many other players struggle or have to accept modest performance? Is the answer that IKEA is customer-centric and the other players are not? Is it that IKEA delivers a superior customer experience?
Cynthia Montgomery in her book The Strategist explores this question and shares her answer. She says:
Purpose is where performance differences start. Nothing else is more important to the survival and success of a firm than why it exists, and what otherwise unmet needs it intends to fill. It is the first and most important a strategist must answer. Every concept of strategy …… flows from purpose.
Will any kind of purpose do the job? Is the purpose of making mountains of profit and enriching shareholders enough? Is the purpose of letting the lean folks loose so that all the processes can be streamlined and any joy, the comes with being social human beings, driven out of existence, enough? Is it enough to simply be great at interacting with customers at the touchpoints that matter? No, according to Cynthia Montgomery.
We hunger for purpose that lifts us up from the harshness and banality of the dog-eat-dog world of competition. And this includes the Tops:
Many of them want to feel that what they do matters in some context larger than themselves and larger even than their companies….
So is an inspiring, uplifting, purpose enough? Not according to Cynthia Montgomery. She says that purpose needs to do much more than inspire.
1. A good purpose ennobles
You and I are are spiritual beings manifested in physical form. Whether we like it or not, in our quiet moments, we find ourselves called to answer questions concerned with meaning. What is life about? What is my life about? Am I leading a meaningful life? Is this organisation and its mission worthy of me and all that I have to contribute?
In an age where 80% of employees are disengaged at work you can see the value of a noble purpose. A noble purpose inspires people in the organisation, it literally elevates and energizes. Talking of IKEA, Cynthia Montgomery says:
The people at IKEA don’t believe they’re flogging cheap furniture. They believe they’re creating a “better everyday life” for the many people who can’t afford top-end furnishings.
Cynthia goes on to say that we should not overlook the vital role of purpose in calling forth and fostering the care and commitment that lead people to play full-out and generate good results.
I say that a good purpose ennobles more than the people inside your organisation. I say that a good purpose ennobles customers, ennobles distribution partners, ennobles suppliers, ennobles the community in which your organisation operates.
2. A good purpose forces choice and puts a stake in the ground
A good purpose forces choice: to stand for one set of values and not others; to do X and not Y; to be this and not be that. Choosing is painful because it means letting go of some options. Choice is also critical because it enables focus. Here is what Cynthia says:
If your purpose does not preclude you from undertaking certain kinds of work, then it’s not a good purpose. Purpose, like strategy, is about choice, and real choice contains …… both positive (“We do this”) and negative )”By implication, then, we don’t do something else”) elements.
3. A good purpose sets you apart; it makes you distinct
A good purpose is not generic, it does not lead you to say “We are a training company” or “We are a telecommunications company” or “We are a marketing agency”. A good purpose spells out the reasons for your existence, the people (customers) you have chosen to serve, the needs you have set out to meet, the contribution that you committed to making. It is in these specifics that the purpose comes alive. Cynthia shares how IKEA describes its difference:
From the beginning, IKEA has taken a different path ….. It’s not difficult to manufacture expensive furniture. Just spend the money and let customers pay. To manufacture beautiful, durable furniture at low prices is not easy. It requires a different approach. Finding simple solutions, scrimping and saving in every direction. Except on ideas.
There is a lot of talk about innovation and how rare it is in larger organisations. Yet, IKEA continues to innovate. What does Cynthia say:
IKEA’s experience illustrates a key advantage of a good purpose. A clear sense of what a company is striving to do can serve as a focal point or a core organising principle around which a whole set of innovations and distinctive features can coalesce.
4. A good purpose sets the stage for creating and capturing value
Whilst I can and do come across as an idealist, I am also a pragmatist. After all I qualified as a chartered accountant, as such I get the critical importance of profits and cash-flow. So does Cynthia, she writes:
Whatever your purpose, it must mean something to others in ways that produce good economic outcomes for you. What made IKEA’s purpose so powerful was not just that it was distinctive or well-defined, or that it made people feel part of something bigger and more important. It also drove IKEA’s superior performance in its industry.
The acid test, then of purpose is this: Will it give you a difference that matters in your industry? Not all differences are equal. You need a difference with real consequences….. Even a legitimate difference such as “best-in-class quality” is often rendered meaningless by companies that trumpet the words but don’t make the investments or tough trade-offs such a goal requires.
If you are doing “Customer Experience” stuff ask yourself this question “This stuff that we are doing will this give us a difference that matters with our customers and in our industry?” I say that much of what is showing up under the Customer Experience banner fails this test. And I have been wrong many times before.
If you have any interest in strategy, purpose, and organisational effectiveness then I throughly recommend getting hold of a copy of Cynthia Montgomery’s book The Strategist. It is both easy to read and it is a great read. I swear she is versed in existential philosophy as her book is imbued with existential tones: purpose, choice, courage, being and becoming….