Challenges shape purpose
The Way, Written on a Monastery Wall
They rejected life to seek the Way. Their footprints are before us.
They offered up their brains, ripped up their bodies; so firm was their resolution.
Li Shang-Yin
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Norske Skog, which translates as Norwegian Forest Industries, is a Norwegian pulp and paper company established in 1962. The company has long been one of the world's leading manufacturers of newsprint and magazine paper. Due to a declining market for publication paper, the company had increasingly focused on finding newer applications for timber and recycled paper, such as packaging and forced. Additionally the company had been forced to divest unprofitable operations across four continents. Thanks to its profitability improvement program, the company became so good at identifying where to make cuts that BusinessWeek praised it in 2009 for turning “shrinking into a science.” The good news has been that the company survived, and the bad news that it failed to find a way to rebound. And in this, it is like many companies in contracting or commoditizing industries - stuck in turnaround mode, with share price consistently in decline.
A long history of trimming.
A habit of streamlining is evident from its history. Norske Skog was started in 1962 with the construction of a paper mill at Skogn in Norway, with the plant opening in 1966 and a second paper machine added in 1967. Half the capital for the project was issued by the Norwegian Forest Owners Association. In 1972 it started a cooperation with various entities and by 1989 controlled all the pulp and paper mills in Norway. Then the first international acquisition came in 1992 and over time it expanded beyond France into Austria in 1996, Czech Republic in 1997, Thailand and the Republic of Korea in 1998. In 2000 it bought several mills in Canada and created NorskeCanada. At the same time it absorbed the Australian Newsprint Mills, a subsidiary of Fletcher Challenge. By 2006 Norske Skog had sold its shares in NorskeCanada and the company changed its name to Catalyst Paper. In September 2005 it acquired the Asian company PanAsia Paper, in turn making Norske Skog Asia's largest producer of newsprint and magazine paper. During the following years, the company suffered from an oversupply in the paper industry and mounting debt. A number of factories were closed, downsized or divested. From March 2007 to March 2008, the stock value plummeted from over NKr 100 to below NKr 18 with a looming possibility of bankruptcy. In September 2008, Norske Skog Korea was bought by Morgan Stanley Private Equity of Asia and Shinhan Private Equity.
Over the following years, the group diversified in order to counter the downward trend of the publication paper market. On a more disturbing note, Norske Skog has been accused of environmental destruction in New Zealand. The company has effectively walked away from the responsibility to clean up the work site and have been refusing to engage with local indigenous Maori, guardians of the environment.
Focusing on one kind of change.
Norske Skog announced that Jan Oksum, chief executive, is stepping down as the troubled Norwegian paper company sped up restructuring after a string of poor results. “Norske Skog has had weak results for a long period,” said Lars Wilhelm Grøholt, chairman of Norske Skog in early 2006. “To improve earnings and increase the pace of the current restructuring of the company’s business, the board believed that Norske Skog would be best served by a change of chief executive.” Standard & Poor had cut Norske Skog’s debt outlook to negative from stable, reflecting the challenges faced by the paper maker and the concern that recent management changes “could impair strategic execution”. Mr Oksum, who began his career at the company in 1979 and became chief executive two years ago, had overseen a restructuring programme that involved cutting production in Norway and Europe, and a shift to growing newsprint markets in Asia. Prices of printing papers had not recovered since the early part of the decade, when a sharp fall in advertising spending led publishers to cut the paginations of newspapers and magazines. Advertising had increased in most markets, but production overcapacity and long-term contracts meant that paper producers were struggling to raise prices. Christian Rynning-Tønnesen had been seen to have made an outstanding effort as CEO in a very demanding period for the group. He was hired by Norske Skog early 2005 as CFO and was appointed CEO in June 2006. Under his leadership, Norske Skog implemented comprehensive measures to reduce debt and improve the group's cost position. However key challenges remained, and he decided to leave the company and accept an opportunity to lead Statkraft, a company he was part of for 13 years before joining Norske Skog.
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LEGO, the Danish toy maker made two large-scale attempts to transform itself through greater innovation. The first one was launched in 2000 and it delivered a wealth of freewheeling experimentation that, over the next few years, drove the company to the brink of bankruptcy. Many of its innovation efforts—theme parks, Clikits craft sets (marketed to girls), an action figure called Galidor supported by a television show—were unprofitable or had failed outright. The second one was launched in 2006 after the company recovered its financial stability. And its the second round that catapulted Lego past the two U.S. giants Hasbro and Mattel to become the world’s most profitable toy company by 2014, with margins greater than 30%.
Shifting to dual focus.
The credit for success in the second round is attributed to the then CEO Jørgen Vig Knudstorp, who had the company maintain a dual focus on growth and discipline. By setting up a cross-functional committee (the Executive Innovation Governance Group) to fund, monitor, and strategically coordinate innovation activities, he ensured that they remained “around the box” rather than drifting way outside it. LEGO managers took a broad view of innovation that included not only new products but pricing plans, community building, business processes, and channels to market, all of which were powerful business drivers. The company distributed responsibilities for innovation in all areas across four groups and expects different degrees of innovativeness.
Changing the relationship with customers.
This way of innovating powered the fundamental shift in the way LEGO approached its customers. For more than 75 years of its history, LEGO made toys exclusively for customers in a closed innovation process. But over the last decade, LEGO learned how to build with their fan community. LEGO’s success — and recapturing of the toy market — came from understanding the diminished power companies have in controlling customer interactions. In the past marketers used to initiate nearly all of the interactions a business could have with its customers. Like a Twitch streamer can enjoy free-flowing dialogue with other gamers online, Instant Pot fans can swap cooking successes (and failures) in specialized Facebook groups, and sneakerheads can critique the latest Nikes on Instagram stories without ever interacting directly with those businesses, in 2008, LEGO launched the LEGO Ideas platform, allowing fans to submit new concepts for LEGO sets. Proposals were voted on by other fans and top vote-getters are reviewed by LEGO staff. Chosen ideas were turned into sets for sale. The fan designer receives 1% of the royalties. This community now has grown to over a million users, more than 26,000 product ideas have been submitted, and twenty-eight sets produced, including a Women of NASA set and playable LEGO piano. Through LEGO Ideas, the 87-year-old company successfully transitioned from simply building for customers to building with an engaged community.
Really engaging.
Jørgen Vig Knudstorp, a former McKinsey consultant who had come to the family-owned Lego Group as an outsider in 2001 and was named CEO in 2004, was instrumental in leading through survival and growth. He was clear LEGO needed a series of distinct leadership approaches to move the 76-year-old Danish toy maker onto a firmer financial footing, reoriented toward growth, and open to ideas from enthusiastic users. By 2004, when he had become the CEO, things had already gone awfully wrong. To survive, the company needed to halt a sales decline, reduce debt, and focus on cash flow. It was a classic turnaround, and it required tight fiscal control and top-down management. At the same time, he had to build credibility. Because he believed that one could make a lot of things happen if one is viewed without suspicion, he made sure he was approachable. And that means - “managing at eye level.” In other words, being able to talk to people on the factory floor, to engineers, to marketers—being at home with everyone. Once the company gained the freedom to live and have a strategy, the management team set out to optimize the firm’s value. In order to do that, they asked, Why does Lego Group exist? Ultimately, they determined the answer: to offer their core products, whose unique design helps children learn systematic, creative problem solving—a crucial twenty-first-century skill. They also decided that they wanted to compete not by being the biggest but by being the best. Implementing a strategy of niche differentiation and excellence required a looser structure and a relaxation of the top-down management style they had imposed during the turnaround because the company needed empowered managers. For example, Knudstorp stopped participating in weekly sales-management and capacity-allocation choices and pushed decisions as far down the hierarchy as possible. Then the company moved into the third phase, pursuing organic growth. While they were growing quite strongly across the world, but to continue building sales volume, they needed to change the leadership style yet again, because the company’s management had become quite risk averse while focusing on survival. In this phase it needed to become opportunity driven, which required taking greater calculated risks. In every phase of strategy change, they paved the way by moving leaders within the company and altering organizational structures and ways of working. For example, they set up a business area dedicated to direct-to-consumer sales, which was all about education and collaborative networks and was fundamentally different from selling to retailers, which was all about efficiency.
Changing the whole model.
In the era of customer participation the Lego community, like the basic interchangeable plastic brick, is one of the company’s core assets. Knudstorp realized the power of customer contributions in 2005, when the company started involving a couple of enthusiastic fans in product development and he started systematically meeting with adult fans of Lego. Since then, they’ve actively encouraged their fans to interact with them and suggest product ideas. An amazing number of grown-ups like to play with Legos. While they saw themselves having 120 staff designers, they tapped into the 120,000 volunteer designers outside the company to help them invent. Customers can now even design their own products—which the company sells for them, or in some cases to others, on Legofactory.com, where they offer our digital-design software for free. Perhaps most important, these superusers can articulate the product strengths and weaknesses that young children may sense but can’t express. Knudstorp was clear that managing user contributors required corporate transparency and a respect for customers’ ideas. They learnt to never take customers’ enthusiasm for granted. They rewarded them by showing that they listen to and care about their feedback. When he attends fan events, he tells customers that while they can’t implement every idea they propose, such as adding solar cells to Lego Mindstorms robots, the more they hear an idea, the more thought they give to it. He also tells customers that they fulfill another vital role: They are an avenue to the truth.
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Nestlé Purina PetCare, the largest player in North America, and Mars Petcare, the global leader, are great examples of adopting two different strategies in the pet-food industry: The companies defined very similar purposes for themselves—“Better with pets” (Nestlé Purina) and “A better world for pets” (Mars Petcare)—and both wanted to develop new products that would help customers improve their pets’ health. But Nestlé Purina continued to focus on the pet-food playing field and was applying purpose in some inspiring social initiatives, whereas Mars Petcare was using purpose to propel its expansion in the broader field of pet health.
Redefining the playing field.
Mars Petcare, which had established a foothold in pet health with the acquisition of Banfield Pet Hospital in 2007, decided to build its presence in that arena by buying two other veterinary services: BluePearl in 2015 and VCA in 2017. Then in 2018 Mars Petcare entered the European veterinary market, buying the Swedish company AniCura, which has operations in seven European countries, and the British company Linnaeus. Those acquisitions helped Mars Petcare become Mars Inc.’s largest and fastest-growing business division.
Expanding the offering.
In moving deeper into this larger ecosystem, Mars Petcare did more than just capitalize on a burgeoning industry. It also shifted its orientation beyond products to services, a radical change for an asset-heavy company that for 75 years had relied on the production and sale of goods. To succeed, the company had to build completely different core competencies and devise a new organizational structure. In this dangerously open-ended situation the likelihood for failure is high. Mars Petcare did not fail and was able to pull off a transformation because it ensured that every move it made was aligned with the same core purpose. And it has continued to go further in being purposeful. The company later expanded into pet-activity monitoring with “smart” collars.
Addressing the pain points.
As Mars Petcare’s health care value proposition led to direct connections with pet owners at multiple touchpoints, the company looked for other ways to create “a better world for pets.” How could it come up with a value proposition that would make pet ownership a seamless, convenient, and attractive experience? The answer was by investing in technology to help address one of the biggest concerns of pet owners: preventing health problems. In 2016 the company acquired Whistle, the San Francisco–based maker of a connected collar for activity monitoring and location tracking—a kind of Fitbit for dogs. Teaming the device up with its Banfield Pet Hospital unit, the company launched the Pet Insight Project, a three-year longitudinal study that aims to enroll 200,000 dogs in the United States. By combining machine learning, data science, and deep veterinary expertise, the project seeks to understand when behavior may signal a change in a pet’s health and how owners can partner with their veterinarians on individualized diagnostics and treatments for their pets.
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Founded in 1948, the Finnish oil-refining firm Neste operated a business focused almost entirely on crude oil for more than six decades. By 2009 the company was struggling. The market was glutted, oil prices had dropped sharply, margins were falling, and the EU had passed new carbon-emissions legislation. During the previous two years the company’s market value had shrunk by 50%. They are a great example of employing purpose to redefine the playing field, this time in the industrial sector.
Facing reality.
Fighting the headwinds, the executive team, led by Neste’s new CEO, Matti Lievonen, realized that the company could no longer survive on its traditional playing field. It would have to look for new opportunities in the larger ecosystem. Renewable energy could be a key driver of growth, they realized. Their purpose, they decided, should be to develop sustainable sources of energy that would help reduce emissions, and everything they did would be guided by a simple idea: “Creating responsible choices every day.”
Going beyond paying “lip service.”
It’s common for major oil companies to nod to sustainability in some way, but Lievonen quickly proved that Neste meant business, launching a bold transformation that would become a seven-year journey. Employees, customers, and investors all initially resisted the change, but Lievonen and his team were undaunted. They made major investments in infrastructure, innovated renewable technologies, focused on converting customers to green energy solutions, and, most important, engineered a fundamental change in the company’s culture.
Doing the real hard work.
The process wasn’t easy. When Lievonen was just three months into his tenure, a leading economic magazine in Finland published an article saying that he should be fired. He soldiered on, however, and by 2015 Neste had established itself as the world’s largest producer of renewable fuels derived from waste and residues. A year later its comparable operating profits from renewables would surpass those of its oil-products business. In 2017 the company took yet another step by actively researching and promoting the use of waste feedstock from new sources such as algae oil, microbial oil, and tall oil pitch.
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Sweden’s Securitas AB, a security company with 370,000 employees, had traditionally offered physical guarding services. This was in line with its purpose of “contributing to a safer society.” However, in the early 2010s its CEO at the time, Alf Göransson, saw that globalization, urbanization, and the increasingly networked business landscape were all changing the nature of risk—for people, operations, and business continuity. At the same time, labor was becoming more expensive, and new technologies were becoming cheaper. Given these developments, Göransson decided that Securitas could no longer “simply sell man-hours.” Instead, the company had to explore new ways of using electronics to provide security. This shift, Göransson understood, was not a threat to the existing business but an opportunity to grow—as indeed it has proved to be.
First things first.
In 2018, when Magnus Ahlqvist took charge at Securitas, he decided to adopt a prospective approach, one often useful for new CEOs. Ahlqvist spearheaded a “purpose workstream” to capture aspirations for the company from the ground up. He asked all his business-unit leaders to run “listening workshops” (with groups of employees from diverse functions, levels, age groups, genders, and backgrounds), which were held over six months. At the end of that period, the findings were collated and analyzed. Among the discoveries: Employees had a vision of transforming the company from a service provider to a trusted adviser. That shift would require anticipating and responding to security issues instead of relying on the legacy methods of observing and reporting. So employee input helped executives refine the firm’s predictive-security strategy.
Changing with the times.
With this new clarity, the company decided to go a step further and reshape its value proposition from reactive to predictive security, a plan that once again built on the company’s core purpose. Under the leadership of Göransson’s successor, Magnus Ahlqvist, the firm strengthened its electronic security business by acquiring a number of companies, investing heavily in modernizing and integrating back-office systems, and training its guards in remote surveillance, digital reporting, and efficient response. That allowed Securitas to offer bundled, customized security solutions—encompassing physical guarding, electronic security, and risk management—that provided a much-enhanced level of protection at an optimized cost. By expanding its value proposition in this way, Securitas has been able to strengthen client relationships and significantly increase its margins for the solutions business. From 2012 to 2018 the company’s sales of security solutions and electronic security also increased, from 6% of total revenue to 20%.
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Mahindra Finance, the financial services arm of the Mahindra Group, a $20 billion Indian conglomerate, looked to its parent company’s longtime purpose-driven strategy of improving customers’ lives when it wanted to define its value proposition. “Rise,” encapsulated in 2010 was the simple motto that the company’s third-generation leader, Anand Mahindra, sensed would inspire employees to accept no limits, think alternatively, and drive positive change.
Looking back to look ahead.
Anand Mahindra employed a retrospective tactic at the Mahindra Group by looking back at his 30 years at the company and at the values that had guided him as its leader. Then he delved into the psyche of the organization by conducting internal surveys of managers at all levels. He also did ethnographic research in seven countries to identify themes that resonated with his company’s multinational, cross-cultural employee base. The process took three years, but ultimately Mahindra arrived at “Rise,” which, he realized, had been fundamental to the company from its inception. “‘Rise’ is not a clever tagline,” he has said. “We were already living and operating this way.”
Following through.
In keeping with the strategy of “Rise,” Mahindra Finance decided to target its core offering, vehicle financing, to rural areas, where it could—as Rajeev Dubey, the group head of HR, put it to us—“address the unmet needs of underserved customers in an underpenetrated market.” And that meant that the company had to figure out how to determine the creditworthiness of customers who were mostly poor, illiterate, and unbanked, with no identity documents, no collateral, and cash flows that were often impacted by monsoons. To do that, the company had to develop completely new ways to handle loan design, repayment terms, customer approval, branch locations, and disbursement and collection in cash. Not only that, but it had to figure out how to recruit workers who could speak local dialects, assess local situations, and operate under a decentralized model of decision making.
Building trust.
Remarkably, the company managed to do all those things and established a preliminary level of trust with its customers. It then stretched its value proposition to help farmers and other customers obtain insurance for their tractors, lives, and health. In a country where insurance penetration is abysmally low (about 3.5%), this was no small feat, especially since rural residents didn’t easily part with any minuscule monthly surplus they had, even if it was to secure their livelihood.
Going even further.
Then Mahindra Finance extended its purpose-driven efforts to housing finance, another arena in which it recognized that it could help its rural customers rise above their circumstances. For most of those people, securing loans for housing was difficult in the extreme. Banks offered loans at an interest rate of about 10% but demanded documentation most rural residents couldn’t provide. Moneylenders offered instant financing but charged interest rates of about 40%. Recognizing an opportunity, Mahindra Finance decided to play at the intermediate level, offering customized home loans at rates of about 14%, an option that appealed to its growing base of customers. And when some of those customers developed successful small agribusinesses, they began looking for working-capital loans, equipment loans, project finance, and so on—more unmet needs that Mahindra Finance could address. So it extended its value proposition again, into the small-to-medium-enterprise arena, offering finance and asset-management services.
Staying true to its purpose.
Throughout its expansion, Mahindra Finance was guided by its goal of helping rural citizens improve their lives. The company identified and committed itself to value propositions that allowed it to deepen its relationship with its customers, which in turn created additional streams of revenue and profits. Today Mahindra Finance is India’s largest rural nonbanking financial company, serving 50% of villages and 6 million customers.
Nature is ever at work building and pulling down, creating and destroying, keeping everything whirling and flowing, chasing everything in a endless song out of one beautiful form into another.
John Muir
We live in a world that is facing multifaceted crises: a health crisis, an economic crisis, a societal crisis, a racial crisis, an environmental crisis, and rising geopolitical tensions. In the face of these challenges, it’s clear whether we like it or not, or accept it or not, business and society have a shot at thriving if employees, customers, and communities are healthy; if our planet is cooler; and if our society is healing. Creating a better and sustainable future requires organizations to serve all their stakeholders — not just their investors. Ideally, that entails creating value through both improving efficiency and innovating. In other words, changing the way we do things - that is, becoming efficient (through streamlining and cost cutting) and changing the things we do - innovating (through reinvesting in growth). The reason efforts to transform organizations derail is that they focus too narrowly on one or the other.
Improving efficiency - In some cases, attempts to change for the better through productivity improvements, outsourcing, divestments, or restructuring undermine growth. That is, changing the way a company does things cuts so deep that the change hollow out capabilities, sap morale, and remove the slack that could have fueled new endeavors.
Reinvesting in growth - And in other cases, reinvestment in growth spins out of control because lack of discipline—through governance, metrics, and other controls—prevents staying on track. That is, changing the things the company does without controls in place makes it easily lose its way. A hasty purchase of an overpriced or tough-to-integrate “transformative acquisition” that is meant to redirect the strategy instead drains value out of the corporation.
“Leaders face a multitude of strategic paradoxes—contradictory pressures that are too often viewed as “either/or” choices. Organizational success depends on simultaneously addressing conflicting demands, not choosing between them. Leaders need to become comfortable with multiple truths and inconsistency. ”
connecting
Efforts and courage are not enough without purpose and direction.
John F. Kennedy
Organizational transformations are difficult for everyone involved because this dual focus on cutting and exploring puts pressure on people at a personal level. Since 2011, Thomas W. Malnight, Ivy Buche, and Charles Dhanaraj at IMD have been studying how creating new markets, serving broader stakeholder needs, and changing the rules of the game was helping drive high growth in companies. They found something unexpected: high growth companies tended to move purpose from the periphery of their strategy to its core. This shift, with committed leadership and financial investment, was used to generate sustained profitable growth, stay relevant in a rapidly changing world, and deepen ties with their stakeholders. From conversations with scores of C-level executives in companies across the United States, Europe, and India they learned that putting purpose at the core played two important roles. It helped those companies:
Redefine the playing field - A key difference, they found, between low-growth and high-growth companies was that the former got consumed in their fight for market share on one playing field, which naturally restricted their growth potential. High-growth companies, by contrast, break out of the limits of their current playing field. Instead, they think about whole ecosystems, where connected interests and relationships among multiple stakeholders create more opportunities. And they approach them with their purpose as their guide.
Reshape the value proposition - When confronted with eroding margins in a rapidly commodifying world, most companies often enhance their value propositions by innovating products, services, or business models. While that can bring some quick wins, it’s a transactional approach focused on prevailing in the current arena. A purpose-driven approach, on the other hand, facilitates growth in new ecosystems by allowing companies to broaden their mission, create a holistic value proposition, and deliver lifetime benefits to customers.
integrating
You see, idealism detached from action is just a dream. But idealism allied with pragmatism, with rolling up your sleeves and making the world bend a bit, is very exciting. It's very real. It's very strong.
Bono
Despite its rise in status and sudden elevation in corporate life, purpose has remained a confusing topic. While there are many positive aspects to purpose playing a central role in the way corporations can place themselves in the economy and broader society, the risk is that speed, shortcuts, and spin often take precedence over authentic action that comes from truly integrating purpose into the very fabric of a company’s workings. The result has been that this precedence has made purpose as something of a fad and a victim of its own success. The ideal that purpose-driven companies can solve social and environmental problems while also generating wealth, creating win-win outcomes that benefit everyone is a myth. Many purpose-driven companies revert to a profit-first strategy if the going gets tough. Others doggedly pursue purpose but then find that their businesses are unsustainable. Research conducted at an array of large public and private companies, points to a better approach. It involves using purpose as a North Star to clarify priorities and inspire action in situations where trade-offs must be made. In such an approach leaders lean into such deliberations in consultation with stakeholders; to look beyond short-term, win-win solutions for ones that are good enough for now and promise broader benefits in the future; and finally, to effectively communicate the thinking behind those difficult decisions to garner support. Called Deep Purpose, this isn’t an easy process. In fact, it can be excruciatingly difficult. Studying and advising organizations over the past few decades, researchers have reviewed hundreds of purpose and mission statements and found that the most compelling—and most effective in guiding decision-making—have two basic and interrelated features.
First, they delineate an ambitious long-term goal for the organization.
Second, they give that goal an idealistic cast, committing to the fulfillment of broader social duties.
These statements are meant to assert the commercial and societal problems a business intends to profitably solve for its stakeholders. They succinctly communicate what a company is all about and who it hopes to benefit. To the extent they are able to embed the purpose in their strategy, processes, communications, human resources practices, operational decision-making, and even culture, they raise the level, or deepen their purpose. As the name indicates, these companies are deeply committed to both positive social and positive commercial outcomes, framing even the smallest decisions, actions, and processes with their goals and duties in mind. Their leaders adopt a mindset of practical idealism. That means they don’t simply accept trade-offs—they immerse themselves in them. They are determined to bring their corporate purpose to life, but they also understand that they must play and win within the constraints of our capitalist system.
expressing
The world is all gates, all opportunities, strings of tension waiting to be struck.
Ralph Waldo Emerson
While a lot has is said and written about corporate purpose, what it actually is seems not as straightforward. So first, we begin with defining the purpose of a corporation: A company’s purpose is the ultimate goal of the business, the essential reason why it exists, and how it contributes to the common good. For example, Google’s original purpose was to “organize the world’s information.” Netflix has defined its purpose as “entertaining the world.” Explicit in this definition is the view that business can and should be a force for the common good, rather than merely a vehicle whose only objective is to maximize shareholder returns, as Milton Friedman argued. To land on a meaningful, authentic, credible, and powerful purpose for ourselves, a thorough exploration of four dimensions is key:
What does the world need: What specific, important unmet needs exist in the world? How critical is it to address these needs? What difference will it make?
What are people at the company passionate about: What drives people at the company? What difference are they keen to make in the world? (These apply to senior leadership and the overall employee population.)
What is the company uniquely good at: What are the unique assets that allow it to address certain needs in a way others can’t? How do they need to evolve/be augmented to address the chosen needs in a way others aren’t?
How can the company can create economic value: What business opportunities stem from these considerations? How attractive are the associated potential profit pools? Can the company capture enough of this value?
The work really progresses when we are able to also tap into the creative and emotional dimensions of being human. Focusing on underlying human needs, rather than on the products and services a company offers to address them, is critical when defining a corporate purpose. First, to make the purpose personal is important because it inspires people within the organization. And it does so, because business is fundamentally about human relationships — and any company is a human organization made of individuals working together in pursuit of a common purpose. Second, it broadens a company’s horizons by opening up the market beyond what a company already does is crucial. The question of what the world needs reaches a company’s employees, customers, suppliers, communities, and shareholders. As Black Rock’s Larry Fink has made clear in his letters to the CEOs of public companies, business cannot thrive in the long run if the planet or the community is on fire, or if employees are unhappy. Business cannot succeed in isolation. Ensuring that stakeholders can all benefit from the company’s purpose starts with identifying clearly who they are, what they need, and how the company could help address those needs. This reflects a view of business that goes beyond the company’s four walls to mobilize all stakeholders in pursuit of the company’s noble purpose. In this approach, business is an ecosystem based on a mutually beneficial interdependence of all stakeholders.
“This idea that for one stakeholder to win, another has to lose is, to me, bad design. I always think like a designer. Design is not the way something looks; design is how something works, and something works best when it works for the largest number of people.”
