Leveraging an organization's purpose for strategic advantage

The purpose

Business schools have long taught future leaders that their main job is to maximize value for their company’s shareholders. They’re told that the best way to do this is to reduce costs while increasing sales, push for operational and financial efficiencies and keep innovation robust.

Business schools all teach that economic life is fundamentally transactional, and we must assume that people are rational actors. Customers will buy when the price and value of proffered goods and services match their needs and resources. Employees, acting in their own self-interest, will put in effort commensurate with their compensation.

Business leaders do not forget these formative lessons, and they still apply. But much has changed in our world. And these lessons need to be supplemented by new ones, some of which are still being learned.

Business remains transactional. Today, however, both the giving and the receiving of value increasingly are digitally mediated and, especially in the age of COVID-19, so are our relationships. As a result of social distancing, the pandemic has accelerated the digitization of everything. Technologically facilitated remote work has removed many of the cues and connections—the nodded hello between manager and employee in the hall or on the factory floor; the spontaneous chats between salesperson and customer; all the meetings, breakfasts, lunches and dinners. These interactions used to knit organizations together, cement partnerships and alliances with other businesses and create customer ties that bind.

Now, something meaningful must take the place of physical interactions that have gone (in some cases, permanently). That something needs to be as meaningful as all those hard-to-measure but enormously important pre-pandemic connections.

That something is an organization’s purpose.

The Importance of Stating Purpose and Winning Trust

An organization’s purpose cannot only be about profit. More broadly, an organization’s purpose today must  be about its social role writ large—how it impacts the world, how what it does makes life better, especially for customers. The more powerful the purpose, the stronger the organization will be. And, today, given the breadth and depth of global disruption, organizations need every bit of strength they can muster.

This year has not only seen a tragic global pandemic claim over two million lives as of the end of January¹, but the societal dislocations it has caused have revealed deep and abiding social rifts and economic ills: racism, income inequality, political polarization, devastating climate change impacts. In response, people are demanding that the companies they work for, patronize and invest in articulate what they stand for and demonstrate that they are a force for active, positive change.

In our view, this is a good thing. Not only is defining an organization’s purpose beyond simple profitability and operational efficiency the best way to pull it together and appeal to customers, but doing so will also help it determine where, and in what ways, it should compete in the fast-emerging digital ecosystems that cross industry boundaries.²

On both counts—their place in society and their place in the digital economy—companies need to articulate their purpose and manifest it in all the ways they conduct business. They need to do this to stay relevant to their customers, employees and other stakeholders.

This understanding is taking hold.

The Business Roundtable is a group of many of America’s largest companies, with collective revenue of more than $7 trillion³. In 2019, it issued a proclamation that defined a company’s purpose as including, but going far beyond achieving, returns for shareholders. The Roundtable urged companies to (among other things) address and foster employee “diversity and inclusion, dignity and respect.” ⁴

Investors, too, increasingly are asking for something more than their share of profits from the companies whose stock they purchase; they are demanding companies explain what they are doing to improve society. Even large institutional investors are sounding alarms on environmental, social and governance (ESG) issues. Some 25% of the shares of American companies surveyed in 2019 by Bank of America are held by investors stressing ESG investment strategies. The bank also says that the most accurate measure of future earnings risk is a company’s ESG rank,⁵ estimating that investment in ESG funds could increase by as much as $20 trillion in the 2020s and 2030s. If that plays out, it would be an increase equivalent to the total value of the current S&P 500.⁶

Many of your customers are in sympathy with those investors. The Edelman Trust Index found that 22,000 consumers across 11 markets want the companies they do business with to address society’s problems (80% of surveyed consumers). Only slightly fewer than those that said “solving my problems” was their priority.⁷ Indeed, when consumers believe a brand has a strong purpose, they are four times more likely to purchase from it, 4½ times more likely to recommend it and six times more likely to defend it.⁸

But some companies have struggled to clearly communicate their core purpose, much less infuse it  into their business practices and processes. The 2020 Edelman Trust Index reports that more than half (55%) of Americans do not trust business as an institution.⁹ And in 2019 (a period of economic growth), only four out of 10 American workers agreed with the statement that “the mission or purpose of their organization makes them feel their job is important,” according to Gallup.¹⁰

The pandemic, of course, makes it harder for companies to bond with their employees. As they work from home, their interactions with colleagues and managers are attenuated. And they are not being quiet about their sentiments. Social media has made it easy for workers  to air grievances and for the public to know which companies are living up to their stated purpose (if they have one), and which aren’t.

This is critical as in a digital ecosystem—increasingly the field upon which organizations do business—every company is competing for customers in a more fluid, integrated environment than ever before. Today’s customer is exponentially more powerful, armed with more information about you and your competitors than at any other time in history.

The CMO: Shaper of the Company’s Purpose

In this digital world of instant and broadly distributed information and commentary, it’s critical that a company’s product or service has an added value, something non- transactional that marks the business as unique in the eyes of its shareholders, business partners, customers and employees. That “something” is the reason your company exists and does what it does (beyond turning a profit) better than anyone else for your customer.

Business leaders need to articulate why their company exists to meet the needs of both current and potential customers. As management scholar Peter Drucker famously put it, “The purpose of a business is to create and keep a customer.”¹¹

In this digital world of instant and broadly distributed information and commentary, it’s critical that a company’s product or service has an added value, something non-transactional that marks the business as unique in the eyes of its shareholders, business partners, customers and employees.

In our view, the leader best positioned to help a company define its purpose is the chief marketing officer, the keeper of the company’s core narrative (see Figure 1).

Digital platforms, and the digital ecosystem of companies that do business on them, have changed  the way customers think about their own purpose. For example, a customer today doesn’t just want to buy a house; she wants to move into a new home and begin a new life. Customers want to do business with companies that provide access to many, or all, steps necessary to achieve their goals. Many companies have used digital technology and partnerships with other companies to make such once-complex tasks far less onerous through their digital devices.

The main driver of a company’s purpose (although not the only driver) should  be the problems it solves for customers. But that firm must also see that purpose through the lens of a digital ecosystem, where multiple companies work together to address pieces of those customers’ problems.

For businesses, this is how purpose drives strategy which, in turn, guides their business and digital operating model.

Toy maker Lego Group is a telling example of the importance of purpose. In the early 2000s, the Lego Group was near bankruptcy. Central to its turnaround was the understanding that the company’s purpose was not to make and sell toys to children. What parents wanted when they bought the toys was to inspire their children’s creativity. This understanding of their customers’ purpose led Lego to develop a “new portfolio of products with incremental changes” that would inspire children to modify the toys themselves—i.e., innovate.¹² And in 2019, during a bad year for toymakers, Lego reported positive growth and today is the world’s leading toy maker by sales.¹³ “We always think of Lego as more than just toys,” affirms Lego CMO Julia Goldin.¹⁴ 

And no officer in the C-suite is better attuned to understanding, creating and keeping customers than the CMO.

Gen Z and millennial customers, for instance, have become the largest pet-owning generation, and Mars Pet Nutrition CMO Jane Wakely has helped define, articulate and communicate the company’s core purpose as delivering “a better world for pets” to a set of customers that increasingly see pets as family members. “All our decision-making and strategic choices ladder up to that,” Wakely says. “We do lots of marketing initiatives to deliver that.”

For example, when Wakely’s data informed her that 65% of pet owners take more selfies with their pets than they do with their families or significant others, she leveraged artificial intelligence (AI) to develop a mobile app that would focus the dog’s attention on the phone during the photo, improving it for a generation that likes “likes” almost as much as their furry friends.¹⁵

Another case of purpose driving strategy and then action was at global consumer goods giant Unilever. Keith Weed, who was CMO until last year, realized that sustainability was becoming a huge issue for consumers as climate change impacts grew too large to ignore. Accordingly, Weed helped Unilever put sustainability and green initiatives at the center of its corporate purpose by embedding Corporate Social Responsibility (CSR) activities “in everything we do.” When it came time to choose Weed’s successor, Unilever named Conny Braams to the title of chief digital and marketing officer, tasked with helping the company create a “future-fit, fully digitized organization” that excels at communicating with customers.¹⁶ One of her moves—to demand social media networks like Facebook and Twitter fight hate speech online—spoke to her firm’s larger purpose. “Certainly, in a country like the U.S., 80% of consumers expect brands to get involved in the social debate and to contribute to a solution to world problems,” she said.¹⁷

These CMOs and others have helped their companies articulate, and then communicate, how they are contributing to the betterment of both their customers’ lives and society as a whole. They are answering the questions both their customers and employees are asking: “Why are we here?” and “What are we doing to support that?” Rather than developing a vague “mission statement” (such as “making the world a better place”) in an executive brainstorming session as companies have in the past, these executives leveraged customer data and employed empathy to discover their company’s authentic purpose which, in turn, would drive their company’s strategy.

CMOs can and should help other corporate leaders, including the CEO, define the organization’s purpose while making sure it resonates with employees. CMOs who do that thereby create an “ambient awareness” of the company’s reason-for-being. It is one that will drive the engagement so critical both to customer relations and to employee retention, not to mention a company’s ability to grow.

In 2015, new Microsoft CEO Satya Nadella led an effort to revamp the company’s mission statement (which by the end of the 1990s it had fulfilled: putting a PC in every home and on every desk). The new mission statement became: “Empower every person and every organization on the planet to achieve more.”¹⁸ This shift, according to CMO Chris Capossela, has helped the software giant recruit a new generation of talent. “With people who  are 30 years old and younger, there’s a much stronger desire to work for companies whose value system maps to their value system, and who stand for things that they personally stand for also.”¹⁹ This reimagination of the company’s purpose allowed it to become far more than a PC, enterprise software and games provider. Today, Microsoft is a major cloud computing vendor (with 30% of operating profits derived from cloud services²⁰) and, with its 2016 acquisition of LinkedIn, a social media company.²¹

At Walmart, which has seen both online and in-store sales surge during the COVID-19 pandemic, Sarah Henry, director of strategic media partnerships, says the retailer has seen “an interesting trend around the growing importance of proximity-based relationships…. How can I help my neighbors in my community and give back to something greater?”²² This emphasis on community has infused Walmart service associates with the spirit of “helping each other out,” a powerful, differentiating purpose that can inspire and engage workers, improving customer service.²³ This ethos has also helped Walmart defend itself on social media and in the press during the early days of the pandemic when supply chains were massively disrupted and customers wanting to stockpile coronavirus-inspired necessities (like toilet paper, disinfectants and hand sanitizer) were irritated by stock-outs.