Why are you in business anyway? To deliver shareholder value? Do you think that’s really enough?
Businesses, by definition, exist to engage in activities that deliver profits to their owners and shareholders. Other purposes or goals are secondary. For example, no matter how much a CEO believes that sustainability is important, unless the business case for investment in sustainable technologies can be made in terms of shareholder value, it likely can’t be justified.
But there is a fundamental shift underway in the way that our economy works, and the role of business in our society. It is becoming apparent that when we come out of this recession, the environment in which companies operate may be very different from the business environment we enjoyed when the recession began.
One of the big lessons from the unraveling of the financial products, unwise investments, and scandals that led us into recession was that it’s important to look at the whole system to understand what’s going on. From securitized mortgage products to Bernie Madoff’s fraud, many people chose to turn a blind eye to what happened behind closed doors they didn’t want to open.
At the same time, the general public is recognizing that climate change is an important issue, and that we simply cannot continue to pollute the planet. So it becomes important, to an increasing percentage of the population, to consider where products come from and where they go after we’re done with them.
As customers begin to recognize that with every purchase they make they are endorsing an ethical framework, both in terms of how the products they buy were manufactured, and in terms of how they can be reused, all businesses will be increasingly accountable not only for delivering shareholder returns, and for serving their customers, but also for serving the greater good.
In a world of increasing transparency, dramatically accelerated by the explosion of self-publishing and social media on the Internet, any organization will much have a much harder time playing anything “close to the breast.” If you aren’t walking your own talk, your customers will know.
Companies that have a clearly articulated mission to guide their decisions and actions will have an advantage over companies that operate by the same old rules of offering a good product or service to meet a client need at a fair price. A sense of purpose gives a company a way to inspire their employees and connect with their clients and other audiences. A good mission statement brings passion to business, creating a connection that is tough to match.
In this new model, profits are not the singular goal for an enterprise to exist; they are the result of the enterprise relentlessly pursuing its mission in service to humanity.
Two examples that come to mind of companies that seem to have a mission that guides them, even to the exclusion of profits (although both have been incredibly profitable) are Google and Apple. Google didn’t initially set out to be a technology juggernaut… they just wanted to make information as accessible as possible to everyone, and had an algorithm that could help facilitate that better than any that had existed previously. The profits came later, as Google figured out how to monetize the value that they were bringing to us all. Apple, in its latest incarnation, seems to have, as its highest purpose, the utilization of design to make our lives easier, simpler, and more reliable. BP also seems to be pursuing a mission (“Beyond Petroleum”) to be the clean energy leader, and to provide the cleanest power possible for all of our needs, but I’m not sure to what extent this is just marketing spin, and to what extent this vision actually guides the company. I’ll need to do more research on that.
There are a few companies out there that have been very good at times, and done a lot of good things for their employees and customers, but who do these things as a secondary priority after profits. Examples that come to mind are Starbucks and Ben & Jerry’s. Both companies grew from a desire to provide a food product to customers in a new way, and as both took off and soared into profitability, they looked for ways to use their profits to do good for their employees and in the world. But I believe the profitability in both cases comes first, and that we will see Starbucks shrink its philanthropic programs and generous employee benefits as conditions become more difficult, and that, if Ben and Jerry’s was following a higher purpose, they never would have sold to Unilever.
In the current recession, so many factors that companies have used in the past to differentiate themselves have just become part of the cost of doing business. Think about sustainability (who isn’t?) or fair prices or the use of technology to serve the customer or helpful customer service. If you don’t have all these things (and more) you’re probably not doing well.
So, in the next economic cycle, in order to pull away from the pack, companies need to find something else to make them special. Nothing is more special than what is in your heart, the reason that you do what you do. Discover it, connect it to helping the world and your customers, and talk about it. We want to know why you do what you do!
(I’m working on this topic for a series of talks I’m giving this fall in Miami, New York, Chicago, and Houston… So let me know if you have thoughts or ideas!)
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