"What is the purpose of your business?"
When asked that question, many leaders default to answers like “To maximize profits,” or “Generate a return for investors.” But the irony is, if your purpose stops here, you’ll have less of a chance of achieving that result.
The purpose of any business should hue pretty closely to “making the world a better place and improving people’s lives.” What that “better” looks like (a company’s “North Star” or brand essence) and exactly how it gets delivered (via its culture and business model) will be different for every company. But that higher purpose is where business results start and it separates the most successful and profitable organizations from everyone else.
Here is the business case for it...
Purpose Drives Employee Engagement – Gallup’s annual survey of the American workforce includes “company purpose” as a key measure of employee engagement and finds that companies with higher engagement levels are 22% more profitable, 21% more productive, and have up to 65% less turnover than their competitors.
Purpose Attracts Customers (and their Wallets) – In a 2015 study on “meaningful brands,” Havas Media Group demonstrated that brands with a high degree of meaningfulness (i.e., those with a recognized purpose of “improving well-being and quality of life”) had a 7x greater “share of customer wallet” than brands with a low degree of meaningfulness. The study also showed that a 10% increase in meaningfulness led to a greater-than 10% increase in premium pricing and a 4.8% increase in customer advocacy (e.g., referrals and promotion).
Purpose Drives Growth and Innovation – A study by Harvard Business Review and Ernst & Young showed that among companies with a strong stated purpose, 58% reported 3-year revenue growth of 10% or more. In companies without a stated purpose, 42% reported flat or declining revenues. The same study showed that 53% of companies with a strong purpose were successful at innovation and transformation initiatives vs. just 19% without a strong purpose.
Purpose Increases Valuation – Perhaps the most important metric of all, numerous studies show that companies with strong purpose create greater value than their competitors. In Built to Last, Jim Collins and Jerry Porras famously demonstrated that companies driven by purpose outperformed the general market by 15:1. In Grow, author Jim Stengel and Millward Brown Optimor created a matrix of 50 firms with the strongest brand purpose (The Stengel 50) and showed that they outperformed the the broader S&P by almost 400%.
Defining a purpose can be hard. Living it can be even harder. But the financial rewards are clear and BrandFoundations can help you get there.
If you think your brand may be in need of a purpose tune-up, download our quick self-diagnostic test and see where you rank. Then give us a call.