{"id":1008,"date":"2019-12-19T10:45:50","date_gmt":"2019-12-19T10:45:50","guid":{"rendered":"http:\/\/janbosch.com\/blog\/?p=1008"},"modified":"2019-12-19T10:45:56","modified_gmt":"2019-12-19T10:45:56","slug":"why-care-about-purpose-in-business","status":"publish","type":"post","link":"https:\/\/janbosch.com\/blog\/index.php\/2019\/12\/19\/why-care-about-purpose-in-business\/","title":{"rendered":"Why care about purpose in business?"},"content":{"rendered":"\n
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Photo by Randalyn Hill on Unsplash<\/figcaption><\/figure>\n\n\n\n

Peter Drucker famously said that the purpose of a business is to create a customer and a customer is defined as someone who pays for the products and services the company offers. This perspective seems to be shared by many in business: as long as revenue and profits are generated, there\u2019s no reason to bother about anything else. It\u2019s all about the money!<\/p>\n\n\n\n

Whenever there\u2019s a discussion about morals and ethics, lip service is\n paid to those questions, but only if there\u2019s a monetary reason for it. \nFor instance, if trading with certain types of industries would be \nfrowned upon by other customers and thus might lead to reduced sales. In\n this case, the revenue loss with existing customers outweighs the \nadditional revenue and, as a result, the company may decide to not serve\n those industries. Although the outcome may be the desirable one, the \nrationale for the decision is pecuniary only.<\/p>\n\n\n\n

At the same time, there are many companies out there that are purpose\n driven and explicitly seek to make the world a better place and improve\n the state of humanity. In the US, Whole Foods and Patagonia are good \nexamples of this. To paraphrase the former co-CEO of Whole Foods, John \nMackey: companies need to make money in the same way as our bodies need \nto make red blood cells if we want to live. But the purpose of our \nbodies is not to make red blood cells. Similarly, companies need to go \nbeyond the sole focus of making money.<\/p>\n\n\n\n

Interestingly, counter to what one might expect, focusing on purpose \nproves to be good for making money. Research shows that purpose-driven \ncompanies have higher profit margins than their competitors. In \n\u201cCorporate culture and performance\u201d, John Kotter and James Heskett show \nthat over a decade-long period, purpose-driven companies outperform \ntheir counterparts in stock price by a factor of twelve.<\/p>\n\n\n\n

The typical reasons why a purpose-driven company might do better have\n to do with more engaged employees and more passionate customers. With \nGallup showing that the percentage of employees engaged in their work is\n in the low teens across the world, it\u2019s clear that significantly \nincreasing that percentage will do miracles for a company\u2019s productivity\n and output. Similarly, we know that word of mouth is one of the most \npowerful and cost-effective ways to reach new customers.<\/p>\n\n\n\n

So, why are so few companies explicit in expressing their purpose? \nOne of the key challenges, I think, is that there\u2019s an instinctive fear \nthat expressing a purpose will be viewed as negative by at least some \ngroups in society, resulting in alienating some parts of the customer \nbase. As Simon Sinek so eloquently expressed this: \u201cPeople don\u2019t buy \nwhat you do; they buy why you do it!\u201d The flip side of this statement is\n that the people that disagree with your why won\u2019t buy from you.<\/p>\n\n\n\n

Another reason, I believe, is that expressing a purpose may easily \nalienate employees. Putting such a stake in the ground may cause some of\n them to shy away from your business, while they could add value from a \ntechnical perspective. The corollary is, of course, that working with \npeople that aren\u2019t aligned with your implicit mission is demotivating as\n you and others may easily end up pulling in different directions.<\/p>\n\n\n\n

The primary reason, however, is that, in my experience, many leaders \ndon\u2019t have clarity on their own purpose nor on the purpose of the \ncompany they lead. And when you yourself are unclear on your \nprofessional purpose, it\u2019s difficult to express it clearly to others. \nThe key challenge often isn\u2019t whether an aspect of one\u2019s purpose is \npositive or not, but rather it\u2019s the relative priority of different \naspects. When having to choose between revenue and environmental impact,\n how much cost savings justify what level of impact? Would your company \ngo out with an ad like Patagonia where they showed a jacket with the \ntext \u201cDon\u2019t buy this jacket\u201d? Or, like Tesla, make your patent portfolio\n publicly available as long as your competitors use it to positively \naffect climate change?<\/p>\n\n\n\n

Doctors have the goal of healing patients. Firefighters aim to \nprotect people and property from damage. Teachers seek to educate the \nnext generation. Business can\u2019t just be about making money. We have the \nobligation to hold ourselves to a higher standard. What\u2019s the purpose of\n your company? And how does your mission align with it? And what hard \ndecisions do you take to live up to that purpose and mission?<\/p>\n\n\n\n

With Christmas and New Year upon us, I encourage all of us to reflect\n on why we do what we do. What are we doing to contribute to a world \nthat gets better all the time? Because the world is<\/em> getting \nbetter and technology is at the heart of that. But it doesn\u2019t happen \nautomatically. It requires us, as technologists, to explicitly focus on \nthe purpose and meaning of what we do.<\/p>\n\n\n\n

This column is taking a few weeks of vacation and will be back in the new year. I wish everyone a wonderful Christmas and an amazing start to 2020!<\/em><\/p>\n\n\n\n

To get more insights earlier, sign up for my newsletter at <\/em>jan@janbosch.com<\/em><\/a> or follow me on<\/em> janbosch.com\/blog<\/em><\/a>, LinkedIn (<\/em>linkedin.com\/in\/janbosch<\/em><\/a>) or Twitter (<\/em>@JanBosch<\/em><\/a>).<\/em> <\/p>\n","protected":false},"excerpt":{"rendered":"

Peter Drucker famously said that the purpose of a business is to create a customer and a customer is defined as someone who pays for the products and services the company offers. This perspective seems to be shared by many in business: as long as revenue and profits are generated, there\u2019s no reason to bother … Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"generate_page_header":"","footnotes":""},"categories":[8,10],"tags":[],"_links":{"self":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1008"}],"collection":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=1008"}],"version-history":[{"count":1,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1008\/revisions"}],"predecessor-version":[{"id":1010,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/1008\/revisions\/1010"}],"wp:attachment":[{"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=1008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=1008"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/janbosch.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=1008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}